Snowball Effect Strategy for the Innovation of the Korean National Pension System and High Return HyTak ETF

Abstract

Hyun Tak Kim

Debates in the Korean National Assembly focus on reforming the defined-benefit pension system as the national pension fund is projected to deplete by 2055 due to a failure to maximize returns, as mandated by Paragraph 2, Article 102 of the Korean National Pension Law. Proposals like raising contribution and replacement rates seem insufficient. We advocate maximizing the fund through the snowball effect by investing in exchange-traded funds with high-return, long-term, steadily growing stocks, despite their volatilit. The fund maximum promotes a more humane quality of life by introducing an automatically and steadily increasing system for pension benefits into the government bill aimed at reforming the national pension system, announced on September 4, 2024. Transitioning to a defined-contribution system, similar to the USA’s 401(k), is crucial for sustainability. Additionally, HyTak fund’s’ return rate could exceed a ten-year average annual return of 35%, equivalent to a compound interest rate of 1,910% over 10 years or 40,327% over 20 years.

PDF