Geo-Arbitrage In South Korea

I hadn’t heard of geo-arbitrage when I moved to South Korea. But, with a little intentionality, I think someone could easily move here and accelerate their path to FI. Let me share a few things that I’ve learned from moving to South Korea.

Before I get into the tangible savings, let me touch on the psychological. I’ve re-defined what I look for in a home. My peer group has changed, and therefore I’m not held to the American standards for what car to drive or what house to live in. And, I never know how long I’m going to be living here! I live a bit like a nomad to an extent so I always think about if I can leave it behind if I decide to move back to the States or on to another country. 

But on to the tangible savings…

Taxes in Korea

Foreigners in Korea only pay about 10% of their income to the government. That includes medical insurance and pension. The US makes you report your income to the IRS, but as long as you’re living and working abroad, you don’t have to pay taxes on your first $100,000. I never made higher than that, so it was never a concern for me! 

Even better is that once you leave Korea, you receive your pension contributions back as a refund. So, you end up paying hardly anything in taxes when it’s all said and done. For every year I worked, I got about $2,000 back in tax refunds (upon returning to the US). 

You’d think the infrastructure wouldn’t be able to hold up with those low taxes, but the roads and government offices in Korea are just as good or better than in the US. I don’t know how taxes in the US can be so high compared to what you get for your taxes in Korea. Perhaps it’s because Korea has 50 million tax payers packed into a country the size of Indiana. They can focus their funds in a pretty small geographical area.

Upon leaving Korea, you also receive a severance bonus from your employer. It’s law in Korea to receive one-month’s salary for every year you work. So, including the tax refund, you’ll receive about two month’s salary for every year worked. I worked for five years in my first stint, and walked away with over $10,000 upon leaving! That didn’t include what I was able to save from my monthly pay-check.

Medical Expenses*

While we’re talking about taxes, let’s talk about medical. That 10% that comes out of my monthly pay also includes national medical insurance. It’s been a while since I’ve lived in the US, so I’m not sure what to compare these prices to. But, here’s a few things that I’ve had done so you can compare. Keep in mind that I pay about $60/month in premiums for me and my wife combined.

  • approx. $5-10 for many standard visits to the doc (colds, etc.) Prescriptions are also surprisingly cheap, often less than $5 or $10. More in depth checkups would cost more, but still way less than the US. 
  • approx. $300 for a broken foot, including x-rays, cast, checkups, etc.
  • approx. $1,000 for kidney stone treatments, including initial shock therapy and six followup preventative treatments.
  • Contact Lenses are comparable price as the US, however you don’t have to pay for an eye exam in order to get your script.

Living Expenses

The living costs (for a single person or young couple with no kids at least) is quite low. When I was single, I was living on less than $1,000/month (about half my paycheck). On top of that, I had no housing expense as schools in Korea generally have free housing for teachers. I used those first five years to pay down all my college debt. 

My wife and I no longer have free rent and we have a car now. But we still live on about $2,500/month. Living on this amount gives us room to save for FI. Someone who’s a little more extreme could do it for less. 

Housing

Our house in Korea is tiny compared to my American peers. When I was single, it was a (free!!) studio apartment . Now, we have a one-bedroom place. If I lived in this sort of apartment in the US, I think my loved ones would wonder if I was doing okay financially. But, here, I’m surrounded by lots of others who are in a more transient situation like me. We never know if we’ll be here in 3-5 years, so we live simply and don’t buy a whole lot

Not only is rent less, but there’s a lot less space that I need to fill with furniture. So, that lowers the living expenses. I don’t need to think about spending thousands of dollars on a new kitchen or a bathroom remodel. It’s just not even a part of our dialogue. The most expensive things we own are from IKEA. Otherwise it’s been purchases cheap or been given to us by others who left the country. 

Transportation

Until the past couple of years, I lived super close to work so I could walk or a free shuttle from my work picked up me. Public transportation is amazing, and it only cost me about $50/month when I didn’t need it for work. I’d definitely suggest keeping this in mind to someone moving here. Now we started working a little further from home, so together we spend about $200/month on fuel and public transportation. Another thing about living transiently is that our car is old, and we don’t care. It was also free, given to us by someone leaving the country! 

Getting Started

Korea isn’t for everyone. Teaching English is great for young couples or singles looking for an adventure. The only credential you need to teach English is a college degree. University professors as well as licensed teachers can also do well in Korea. International schools and universities in Korea all hire foreigners. Those usually require at least a teaching degree, sometimes a Masters of Education. 

Samsung and some other Korean companies also hire a lot of engineers and computer programmers. Some of them even get free housing and/or international school for their children paid for. I’m not sure details of these exactly, but it’s definitely worth looking into.

Maybe you can’t make the move yourself, but keep this in mind for someone you know! Maybe your kids, nieces/nephews or someone else you’re mentoring. Just think outside the box and look outside the US for a bit. It doesn’t have to be a permanent move. Just moving for a year or two can be enough to hit the reset button and get a jump start on your savings, debt pay down or investments. 

The best advice I got when I left was, “Dude, it’s only a year…just do it.” A year turned into 10, and here I still am! 

Geo-Arbitrage in South Korea

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