Korean Job Discussion Forums

[dharma bum]

I've been in Korea quite a while now and am getting to the age where I need to start thinking about retirement planning. I'm a U.S. citizen and don't plan to stay in Korea forever, for what it's worth, but think that it's more likely that I will continue to live overseas than that I will return to the U.S. for work. What might be the best direction to go in? From my understanding, IRAs are a no-go because of the foreign income exclusion but what about mutual funds? Is there anything that can be done with my Korean pension; for example, would it possible and/or prudent to have it transfer over to the U.S.? I'd just really appreciate hearing about people's experiences saving and anything else retirement-related that you'd like to share. Thanks!

*Mods, if this is in the wrong forum, I apologize. Please feel free to move it.

[PRagic]

I've been working through a couple of different financial planners and wealth managers in the US; each of the guys has a different approach, but both seek to protect capital and to grow the nut. Both handle accounts for people in my family and have for a long, long time. You can have as much or as little input on your portfolio as you want.

Ask people back home if they know someone or some firm, get introduced, have a talk with them about what you can realistically send back, your ristk tolerance, and your goals. I do have a couple of buddies who just go it on their own using trading accounts here and abroad. For this avenue, you really have to stay on top of the market, though. Your call. Different strokes for different folks.

In Korea, we generally only go after IPOs, and those are buy-and-dump opportunities for a quick buck. The downside is that you need a lot of coin to get into the game. And, again, nothing is risk free. We invested in some land here in the late 90s as well. With any luck, that could be a nest egg or a good part of one.

I have other friends who go the realestate route and pick up a house now and then in Canada or the U.S. They rent them out long-term through a property management company. They have balls of steel IMHO as being an absentee landlord is not for everyone.

Korea is a great place to bank away and start investing for your (early) retirement. If you're debt free, even if you can only plunk down 10K a year or so, do the math! And the faster you get that coin working for you, the better off you are (caveat: not withstanding a financial meltdown that you can't get out of fast enough!).

Good on you for getting motivated. Best of luck with it.

[dharma bum]

Thanks, PRagic. Your post was really helpful. I'm not the type that follows the market closely enough to trade on my own, so I think your suggestion of finding a financial planner might be the best choice for me. I'll start asking around.

Real estate investment is another avenue I've been quite interested in recently, and I'd like to hear a bit about your friends' experiences with property management companies (just whether they've been positive or negative, etc.) and being an absentee landlord if you'd be willing to share. It's a type of investment that appeals to me, for some reason, but I can also think of many ways that it could go wrong.

I totally agree with you that Korea is a great place to save, and I've gone far too long without taking advantage of that. Better late than never, though, and I'm excited to see what my options are.

Thanks again!

[viciousdinosaur]

I'm not sure you can actually withdraw your pension if it's passed ten years. I know if the case of Canada, you can only do a pension transfer, not cash withdrawl, after ten years.

Since what you are planning on is going to involve a currency transaction, that's where you stand to lose or gain the most money. The won is undervalued right now, so it makes no sense to send it home. Even leave it here or move it to a country that's even more undervalued.

[edwardcatflap]

[ttompatz]

IF you have the CASH then there has never been a better time to get into the US real estate market.

Short term the values may fall a bit more but in my humble opinion they have pretty much bottomed out in most markets. In the longer term you can expect the values to rise at or above the local inflation rates and there is the added benefit that you can make some money, even as an absentee landlord, before you sell.

If you have no plan to ever return to the US then real estate in Asia is a mixed bag. In many countries there are restrictions on foreign ownership of "land" or direct foreign investments in other "protected" industries.

If your significant other (married) or children are from Asia (hold citizenship) then that can provide a loop-hole around the restrictions.

Depending on your risk aversion time deposits at about 3% are readily available at most banks and are insured up to certain levels.

If you are more risk tolerant then mutual funds provide an entry into the market for those who don't have the time or interest to get up to speed on individual investments (stocks, bonds, equity funds, etc).

The next step up would be looking at direct investment in a business venture (much higher risk but potentially much higher returns as well).

The bottom line to all of this is to look at your time factor (how long before you need it), risk tolerance (how much risk can you afford to take / how much risk are you willing to take), and the amount ($$$) you are looking at to put in and then to get out.

There is no magic answer.

In my own case I just bought dirt. I got a good deal on 5 hectares of raw land on a hill, looking out to the sea. I bought it. I built a house on it. I have no debt. The house is patiently waiting for me (vacation house in the mean time) and come the time to retire I will sit there and putter away in the vegetable garden.

In the mean time I just leave my continued savings (adding to them monthly as well) sitting in time deposits (yes it loses some value to inflation over time) but it will be there ready for me when I want it and there is "0" risk involved.

No debt, coupled with mortgage free housing and decent savings will allow me a comfortable lifestyle on a monthly income (residual income at 3%) of about US$2000/month without touching the principle long after I finally decide to quit working.

.

[PRagic]

The U.S. has a pension transfer as well, and that's a major consideration if you move back mid-career. OP, you have your pension and your retirement? See what you can find out about how much and when you can get what you can. TPatz is the resident expert on the board so maybe he'll chime in.

The won is undervalued now, but currency exchange is a mad man's folly. Supposedly, it's may strengthen up into the 1200 ballpark, but I'm not holding my breath. If you are looking at xfering a serious chunk of change, then it wouldn't hurt to wait it out a bit. We had a scare only a few months back when it vacillated wildly and could have gone either way before settling into its current band.

On the upside, Korea just got lopped in with some new 'up and comers' termed MIST (Mexico, Indonesia, S. Korea, and Turkey), and foreign funds have been flowing in, perhaps partially as a result of this and in spite of the fact that each of the countries has a downside that might negate the rationale for these inflows. Money needs to park somewhere, though. This could strengthen the won, but a wet burp in global demand could undue that pretty quickly. Oversimplified, but it is what it is. For the most part, we exchange when we think it's a decent hedge and keep that in a foreign funds account here. Tough to call the lows and highs, but if you're only exchanging a few grand here and there, things can work out so that your realized loss (or in a best case, your realized gain) is negligaible. When we want to xfer a lump, then we go ahead and send it off.

Can't really tell you more about the real estate investing back 'home'. All I know is what my friends who do that tell me. Some of the property managers are great, some not so much so; same goes for the tenants. I think the end game is to buy with low downpayments, get a tenant in to pay rent that will cover the mortgage and management fees, maybe plus a little gravy, and then sell the house for a decent profit sometime down the road when into retirement. From there, although we haven't talked this far through it, I imagine you could get a fixed annuity or a portfolio generating dividends to hold the coin and provide additional income.

[dharma bum]

Thanks for both of your responses.

viciousdinosaur: I agree with you about the won being undervalued. Unfortunately, I'm not so sure its value is going to go up anytime soon, and I really do want to get started with things. I'm not against investing within Korea, though, as long as I feel like I'm going to get a good return on my investment.

edwardcatflap: Thanks for sharing your experience. I agree that it seems like one of the better investments around these days. I would definitely choose an area that I knew about to invest in, and I just wonder if doing this type of thing in the U.S. would be more of a hassle due to differences in taxes, property management practices, etc. I'll have to look into it.

Another idea I've come across in my research is buying property in a third country where property is cheap at the moment (Bulgaria was one example, I think) and then renting it out while the property appreciates in value. I'd have to do a lot of research before feeling comfortable investing in property in a country I wasn't a citizen or resident of though.

(EDIT: I posted this before reading the last two responses, sorry. Great information in both posts--thanks and I'll try to respond shortly!)

[edwardcatflap]

[PatrickGHBusan]

OP, if it is any help, like Ed we bought property in Canada while living in Korea. We really had no intention to return to Canada in the near future so the properties were an investment.

We bought a house in the early 2000s and it was paid off in under 10 years while we rented it out. A few years after we bougth the house, we bought an apt building and that was paid off in under 10 years as well. It has been generating income eversince and paid for itself while we had a morgage. We hired someone to look over the places.

When we ended up moving to Canada, we took possession of the house (tenants were leaving anyway) and lived there morgage free for a while. We then sold it and made a pretty good profit (the market has been hot since 2000 where we bought it). With the profit we bought a condo in the city where we live for cash. No morgage again. The apt building still brings in a profit and covers our city taxes and maintnance on both properties.

While in Korea we also invested through a financial planner to substantiate our pensions. So it can certainly be done with proper planning and by sticking to a plan.

One thing, being an absentee landlord while living abroad requires you hire and pay someone your trust completely to manage the place. It also requires you plan financially for the upkeep of the place and for repairs. We set up an account for repairs and gave our guy access to it after he cleared it with us. We set up automatic deposits from the montly rent into this account. So, a few years ago when the roof had to be redone, we paid for it by using these funds and thereby no stress for us!

Also, tenants can be a gigantic pain in the butt and you need to be ready to deal with this which is why that trusted person to manager your place is critical.

[Hotpants]

Yeah, if you have the spare cash, I'd definitely invest in real estate somewhere in the West - pref a large city in the US or UK where there's always going to be a housing shortage and plenty of college students looking to rent. I know of one or two teachers in Korea who have properties back home, and get either a trusted friend or family member to manage it for a small cut in the rental fee they take in. There are also realtors who can act as an agent to manage your property in your absence. If you let to students, you can pretty much guarantee a 10-month income each year, and have a vacant property for you to vacation in over the summer.

Leaving money just sitting in the bank is going to see it worn down over the years as inflation takes over. You can invest in various bonds through internet banking whether you're in or out of country - some of these have guaranteed returns, but nothing with a wow factor. I get a kind of, 'scrape by for 1 month of the year for free' with such bonds. Certainly better than doing nothing with your money.

[Malislamusrex]

You can get 5% interest in most banks in Korea if you have over 50 million cash. You are only going to get 3% max in most other Western countries. The best option in the short term is to let your cash gain against other markets .

I invested in the property market from 2001-2007 and you could x4 your profit. That is not going to happen now. You will be lucky if house prices raise with inflation in most countries in the near future. Your best bet is to just beat your home country's inflation rate by about 2%. It will add up in the end.

[iggyb]

If you still have to be married to a Korean to invest in property in Korea, and you are married to a Korean, you might want to ask your questions at the Open Comment posts at rokdrop(dot)com.

I know there are several long-term expats in Korea, mostly having transferred from military servace to military contractors jobs, who have invested in different types of property deals in Korea - from commercial to rental - and other investments. They have discussed it every once in awhile with each other.

Just like what others here seem to know about doing it in your homecountry, they seem to know a fair amount about opportunities within Korea. I've tried to talk my wife into putting money in the low risk, longer-term savings accounts in Korea with much higher percentage returns than we can get in the US, but I guess she doesn't trust her mother that much...

[dharma bum]

Thanks for all of the replies. They've been incredibly helpful.

Real estate investment still seems quite interesting to me (especially as PRagic's friends have done it, with low down payments and using the rent to pay off the mortgage, etc.), as long as I can get someone reliable to look after things while I'm here. It was really great to hear how much success PatrickGHBusan has had with that.

I'm not married to a Korean and so have my doubts whether real estate investment would be the way for me to go here. The long-term savings accounts do sound interesting, however, at least until I can get some other things worked out.

I really enjoyed hearing about ttompatz's approach. I'm not quite as risk-averse but am close, and it's good to see how well things have worked out for you. I think you're probably right about investing in property in Asia (though I'm not 100% sure I will return to the States), and edwardcatflap also makes a good point about the risks of that.

Financial planners and mutual funds are something that I'm going to continue to look into and see what type of risk-reward ratio I might be looking at.

Thanks again for all the replies!

[b-class rambler]