Sunday meetings with my Korean student always bring up something new for me to think about. During our last meeting, we talked about the retirement systems in America and South Korea.
There are both similarities and differences between the retirement systems of South Korea and the U.S. In both countries, retirees receive money from a mix of sources.
However, there is one significant difference between the two. In South Korea, corporate pensions are common, which is rare among U.S. private companies. Instead, American companies encourage employees to contribute to their own retirement accounts, such as 401(k) plans, by matching about 3% of the employee's contribution up to a certain annual cap.
Although both countries have capitalist systems, the relative absence of corporate pensions in the U.S. reflects broader cultural differences between the two countries.
American culture is characterized by strong individualism and freedom, with an emphasis on personal responsibility and self-reliance, and super downplaying the role of a collective and the government. When it comes to retirement, individuals are encouraged to take charge, rather than relying on the company or the government.
With maximum personal freedom comes the huge responsibility for the consequences of one's choices. You decide how to save for your retirement, and as a result, you are expected to live with the consequences of your decisions.
In contrast, Korean culture retains some of its traditional values, emphasizing community, family, and social harmony. Individuals still consider the needs and expectations of the group.
There is also a stronger sense of interdependence among family members, communities, and within society. Support systems are often more collective, with families playing a crucial role in caring for elderly relatives.
In conclusion, the differences in retirement systems between South Korea and the U.S. sharply highlight the cultural values that shape each society. While Americans prioritize individualism, freedom and self-reliance, Koreans emphasize community and familial support. Understanding these cultural contexts can help us appreciate the diverse approaches to retirement planning around the world, and also prepare people financially if they decide to retire in the U.S.
Incidentally, China and South Korean share heavily with the emphasis on the collective and interdependence, even though the two countries follow different system.