Korean Job Discussion Forums

[bucheon bum]

Ok, I didn't factor in the the fact that it is a perpetuity. From my attempt to put a value on your potential annuity, I calculated it to be worth about $74K in today's dollars with two assumptions:

1. 1000 won=1 dollar
2. A discount rate of 4%

So yeah, ignore my previous post . Might be wise to just make the contributions. Even if you were to invest that money into something that gave you a 8% return (but 4% once you figured in the aforementioned DF), you wouldn't come close to that $74K. This is also making the assumption that you would start withdrawing 300/month no matter which route you decided to take.

[jaykimf]

[jaykimf]

[Ya-ta Boy]

Lots of interesting and useful information, guys. Thanks. Keep it up!

I'll try to answer some of the questions:

1. I don't know for a fact that the pension plan is adjusted for inflation. It's a gov't (Korean) run plan. All I can say is that I would expect it to be adjusted from time to time, but who knows.

2. I just checked and my mutual fund is at 29.01% right now. (In late 2007 it was at a happiness-inducing 45%.) I know that's exceptional--last winter at this time it was in negative territory, big time. I can only withdraw at the beginning of April without penalty, so there is a narrow window of opportunity each year. One reason the pension plan is attractive is its reliability--who is to say where my fund will be in 5 years? Or the currency exchange rate, for that matter.

3. I've been paying W180,000 a month (or whatever the monthly deduction has been) and my employers the other half for 5 years. Now I have to pick up the slack since the employer is no longer required to kick in if I stay in the program. I figured the 7 1/2 years by adding up monthly contributions.

Thanks again for the advice/information. It's been helpful. I've been tossing this around for a couple of weeks and it helps to hear other views.

[bucheon bum]

[jaykimf]

If you have been paying in 180k a month and your employer the same amount for 5 years, you should have about 21600k in the plan. Assuming a 10% return and assuming you put the same 300k a month that you would have put into the pension into your mutual fund, at the end of 1 year you would have 27360k (21600 *1.1 +3600) year 2 33696k, year 3, 40665, year 4, 48332k and at the end of year 5, 56765k. (of course this is very simplified because your returns will vary from year to year and you have to take into account taxes etc.) A 10% return on the year 5 amount would be 5675k/ year or 473k per month for the rest of your life (and the principal would be left to your estate). This is very simplified, your actual returns will vary considerably from year to year and may average out to significantly more or less than the 10% that is assumed for illustration. You can vary your assumptions about your starting investment and rate of return and see where the math takes you. I think I would be inclined to take the money and invest it myself. There is the potential for a much greater return, however there is also more risk involved. People who are extremely risk adverse would undoubtedly take the risk free pension. Anyway, good luck with your choice, there really is no correct choice without taking into account your own risk tolerance.

[jaykimf]

[bucheon bum]

[Ya-ta Boy]

[bucheon bum]

[Ya-ta Boy]

Yes, I could withdraw the money up to this point and do whatever I want with it.

I went in last Friday afternoon and set things up for the next 5 years. I decided that the security of having W300,000 a month forever with no way to lose it was a better deal for me at this age than gambling on the stock market.

Considering the political paralysis in Washington that shows no sign of getting better, the security of having an independent income from a second country, no matter how small, just might be a good thing. I also have my fingers crossed that the Korean gov't will raise the payout at some point in the future to keep up with inflation. Who knows, it could happen.

Thanks again for the advice, guys. It was good to hear the different views.

PS: My mutual funds were doing great last week. One was at 30% and the other at 21%, the highest in over a year. Sadly, the market has been dropping Friday and today. IF the decline is just temporary and things have recovered by April, I'll be raiding the smaller fund to buy a new car. I think I deserve it.

[Ya-ta Boy]

Apologies to the OP for totally hijacking his thread on a very important issue. In an effort to restore it to the original topic, here is something from Martin Amis:

'But none of those opponents were as tough as his new target promises to be. Now 60, Amis has picked a fight with the grey power of Britain's ageing population, calling for euthanasia "booths" on street corners where they can terminate their lives with "a martini and a medal".

The author of Time's Arrow and London Fields said in an interview at the weekend that he believes Britain faces a "civil war" between young and old, as a "silver �tsunami" of increasingly ageing people puts pressure on society.

"They'll be a population of demented very old people, like an invasion of terrible immigrants, stinking out the restaurants and cafes and shops," he said. "I can imagine a sort of civil war between the old and the young in 10 or 15 years' time.

"There should be a booth on every �corner where you could get a martini and a medal," he added.'

http://www.guardian.co.uk/books/2010/jan/24/martin-amis-euthanasia-booths-alzheimers

It pushes one of my buttons because years and years ago, when I was teaching Me Generation high school students in the heart of red neck country, I told them my prediction was that they would have wheel chair races with each other, pushing their grannies into gas chambers in the name of fiscal responsibility and low taxes. I have seen nothing in the past 35 years to change my mind.

I totally believe in dying with dignity, but the way things are going, there is going to be enormous social pressure from the insurance companies to cut their losses by encouraging my generation to 'think of the next generation'.

[GwangjuParents]

[Ya-ta Boy]

I knew that would appeal to some. I suspect there are plenty more posters who also agree with it.

Lots complain about the Social Security system (rightly) and the need for reform. They usually refer to it as entitlement reform, possibly as a euphemism meant to undercut the idea that anyone (but them) are entitled to anything. Few are specific about the reforms they consider desirable. I'm suspicious that many are using 'reform' as a code for abolishment.

I'm curious just what reforms they have in mind.