Minimum Pension Withdrawal Rules — When and How Much to Withdraw
The pension account you built up with tax benefits—after retirement, can you withdraw as much as you want whenever you want? Both Korea and the U.S. have rules about "when and how much."
Korea: Two Requirements to Receive It as a Pension
To receive money from pension savings and an IRP as a "pension" while keeping the tax benefits, you must meet both of the following conditions.
(1) Age: 55 or older (2) Enrollment period: 5 years or more
The year you satisfy both conditions becomes "pension-receipt year 1," and the count rises automatically even if you don't actually withdraw money. As an exception, if severance pay from your company was rolled into your IRP, you can begin your pension at age 55 even without meeting the 5-year enrollment requirement.
Why set such requirements? Pension savings and IRPs are accounts whose taxes were reduced on the condition of preparing for retirement. So if you withdraw too early or all at once, the structure claws back those benefits.
Requirement source: National Tax Service (NTS) pension-account guidance, Easy Living Law Information (pension savings). Detailed rules may be revised, so we recommend checking Hometax or a financial institution's pension center.
The Pension-Withdrawal Limit — The "How Much Per Year" Formula
Korea sets a ceiling called the "pension-withdrawal limit" rather than a minimum withdrawal. If you receive within the limit, a low tax rate (pension income tax, roughly 3.3-5.5%) applies, and if you withdraw beyond the limit, relatively heavy taxes (other income tax, retirement income tax) are added.
The formula is as follows.
Pension-withdrawal limit = Pension account valuation ÷ (11 − pension-receipt year) × 120%
For example, if the valuation is 300 million KRW and it's year 1, then 300 million ÷ (11−1) × 120% = 300 million ÷ 10 × 1.2 = 36 million KRW is that year's limit. It is recalculated each January 1 based on the valuation. From year 11 onward, the denominator becomes 0 or less, so the limit restriction effectively lifts.
In other words, the purpose of this rule is "if you receive it slowly in installments, we'll tax it less."
Limit formula and example source: Mirae Asset Investment & Pension Center, National Tax Service. The actual applicable tax rate varies by age and receipt method, so individual verification is needed.
The U.S. RMD — A "Minimum Withdrawal" in the Opposite Direction
The U.S. is the exact opposite of Korea. For tax-advantaged retirement accounts (traditional IRA, 401(k), etc.), once you reach a certain age, the RMD (Required Minimum Distribution) forces you to "withdraw at least this much."
Under the SECURE 2.0 Act, the RMD starting age is 73 (rising to 75 from 2033). The first year's RMD can be deferred until April 1 of the following year, and if you don't withdraw the set amount, a heavy penalty of 25% of the un-withdrawn amount (10% if corrected within 2 years) is added. However, a Roth IRA has no RMD during your lifetime.
To summarize, Korea says "don't withdraw too much (a ceiling)," while the U.S. says "withdraw at least this much (a floor)"—opposite directions. The reason the U.S. sets a floor is to eventually force withdrawal and tax money whose taxation was deferred.
RMD age and penalty source: IRS (Retirement topics — RMDs), Congress.gov CRS (IF12750, SECURE 2.0 age 73/75). U.S. tax law can also be revised.
Preguntas frecuentes
Q. Is it a loss if I withdraw beyond the limit?
Rather than an outright loss, your tax rate rises. If you receive within the pension-withdrawal limit, a low pension income tax applies, but the portion exceeding the limit is taxed at a relatively higher rate such as other income tax or retirement income tax. If you urgently need a lump sum, withdrawing beyond the limit is possible, but it's good to calculate in advance how much heavier the tax burden becomes.
Q. Does Korea have a "mandatory withdrawal" like the U.S. RMD?
Korea's pension savings and IRP have no U.S.-style minimum-withdrawal obligation that says "you must withdraw at least this much." Instead, using a ceiling method (the pension-withdrawal limit) of "if you withdraw too much, the tax gets heavy," it induces you to receive it slowly. That said, rules can change with tax-law revisions, so you must check the latest rules at the time of actual withdrawal.
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