IRP Account ETF Investment Guide: How to Invest in ETFs with Your Individual Retirement Pension

An IRP (Individual Retirement Pension) is a personal retirement account where you can roll over severance pay or make voluntary contributions to build your retirement nest egg. You can open an IRP at a bank, brokerage, or insurance company — but for ETF investing, a brokerage IRP is most practical.

The biggest advantage of an IRP is the tax deduction. Combined with pension savings accounts, you can receive tax credits on up to KRW 9 million per year. Those earning under KRW 55 million in gross salary receive a 16.5% tax credit, while higher earners receive 13.2%. For example, an employee earning KRW 50 million who contributes KRW 9 million to their IRP can receive approximately KRW 1.485 million in tax savings.

However, IRP funds should ideally be withdrawn as an annuity after age 55 to fully enjoy the tax benefits. Early withdrawal triggers a 16.5% miscellaneous income tax. When received as a pension, only a reduced pension income tax of 3.3–5.5% applies, making the effective tax burden significantly lower than a regular brokerage account.

IRP accounts limit risk asset exposure to 70% of total assets to protect retirement funds. The remaining 30% or more must be invested in safe assets such as bond funds, deposits, or ELBs. Understanding this rule is essential for IRP ETF investing.

Risk assets include domestic and international equity ETFs (e.g., KODEX 200, TIGER S&P500), balanced ETFs, and REIT ETFs. Safe assets include bond ETFs (e.g., KODEX 10-Year Treasury, TIGER US 10-Year Treasury Futures) and money market ETFs.

Important restrictions: Leveraged ETFs, inverse ETFs, derivatives-based ETFs, and foreign-listed ETFs (SPY, QQQ, etc.) cannot be purchased in an IRP. Only ETFs listed on the Korean stock exchange are eligible. To gain US market exposure, you must use domestically listed overseas ETFs such as TIGER US S&P500 or KODEX US Nasdaq 100.

Since 2023, TDF (Target Date Fund) ETFs have also become eligible for IRP investment, enabling automatic lifecycle-based asset allocation.

Here are three portfolio models designed to comply with the 70% risk / 30% safe asset rule.

Conservative Portfolio:

Risk assets 50% — KODEX 200 (20%), TIGER US S&P500 (20%), KODEX MSCI World (10%)

Safe assets 50% — KODEX Aggregate Bond Active (25%), TIGER US 10Y Treasury Futures (15%), Deposits (10%)

Balanced Portfolio:

Risk assets 65% — TIGER US S&P500 (25%), KODEX US Nasdaq 100 TR (20%), KODEX 200 (10%), TIGER Philadelphia Semiconductor (10%)

Safe assets 35% — KODEX 10-Year Treasury (20%), TIGER Short-term Monetary Stabilization Bond (15%)

Aggressive Portfolio:

Risk assets 70% — TIGER US S&P500 (30%), KODEX US Nasdaq 100 TR (25%), TIGER Philadelphia Semiconductor (10%), KODEX 200 (5%)

Safe assets 30% — KODEX Aggregate Bond Active (15%), TIGER US 10Y Treasury Futures (15%)

Regardless of style, rebalancing once or twice a year is critical. If equity ETF allocations approach 70% due to market gains, the system will automatically block further purchases, so proactive adjustment is necessary.

Here are practical strategies for managing ETFs effectively within your IRP.

First, choose your brokerage carefully. The number of ETFs available and trading fees vary by brokerage. Major firms like Mirae Asset, Samsung Securities, and NH Investment offer a wide selection, and some waive IRP ETF trading commissions.

Second, spread out your contributions. Dollar-cost averaging (DCA) by contributing a fixed amount monthly — around KRW 750,000 per month — tends to lower your average purchase price compared to a lump sum at year-end.

Third, always compare expense ratios. Even ETFs tracking the same index can differ in fees across providers. Over a 20–30 year IRP horizon, a 0.1% difference in total expense ratio (TER) compounds into a significant gap in returns.

Fourth, avoid buying ETFs immediately after rolling over severance pay. After receiving a lump-sum transfer, take 3–6 months to analyze market conditions and invest gradually.