This year's deepest severance tax break starts its clock at the first annuity payment

The tiers count payout years. A payout year happens only when money leaves the account. "Even if you leave severance pay in an IRP and wait 10 years, the tax-saving clock does not start until you begin drawing the pension," said Park Eun-hee, head of KB Kookmin Bank's Golden Life Center in Busan ^[10][2]. She also said: "The payout period accumulates only when you withdraw as an annuity each year." ^[11]

Annuity payments cannot begin before 55 ^[7]. Leave the money untouched for a decade first, start at 65, and the 21st payout year arrives at 85 ^[2]. The lower rate applies to amounts withdrawn once the period passes 20 years ^[6]. Spread a balance evenly over 30 years from 55 and a third of it goes out in the cheapest band, with two thirds passing through the roughly 70% and 60% bands ^[3].

Stretching the schedule carries a portfolio cost of its own. Park said "during the payout years you need funds you can use immediately", naming medical bills and living costs, secured in cash-equivalent assets ^[16]. For savers who find investing difficult she cited TDF 2040, a roughly 60-40 split between stocks and bonds, for those still years from retirement, and TDF 2025 or 2030, weighted toward safer assets, for those already retired ^[14]. "Leaving severance pay entirely in deposits makes it hard to beat inflation, while concentrating it in high-risk assets leaves too little time to recover losses," she said ^[15]. She said weightings should be reviewed at least once a year against the timing of pension withdrawals and one's risk appetite ^[20].

Park listed three inputs into the size of the annuity itself. "The split between a lump sum and an annuity depends on the assets you hold, your dependents and when you start drawing the National Pension," she said ^[19]. Her order of operations: "Set aside living expenses and emergency funds for the next several years first, then decide over how long to draw the remaining severance pay." ^[18]

Beside the retirement pension sits the private pension, where deductible contributions and investment gains are taxed at 3.3% to 5.5% when received as an annuity, depending on age at receipt ^[12]. Park's suggested top-up is "within 1.5 million won a year" ^[13], which is 125,000 won a month ^[5]. She suggested drawing generally in the order of retirement pension, then private pension, then the National Pension ^[17].

In my view the amendment argues for starting the annuity early and drawing it slowly, since the qualifying period accrues on withdrawals and on nothing else ^[11]. A saver whose cash needs after retirement outrun a 20-year schedule pays the roughly 70% tier on most of the balance and collects nothing from this year's change ^[4][6]. The percentages come from Park; the article does not cite the amending provision ^[21].