How to Avoid a Health Insurance Premium Bomb as a Freelancer
4 min read · · Korean original
Contents 4
Did you know that, as a freelancer, you need to be careful not to let your financial income exceed KRW 10 million a year? Unlike office workers, who are employee subscribers, freelancers are regional subscribers and are subject to a different financial income threshold, so their health insurance premiums go up the moment they cross KRW 10 million.
But KRW 10 million is an amount you can easily exceed once you start managing financial assets. So if you want to pay less in health insurance premiums as a freelancer, you need the right strategy and countermeasures. Shall we take a look together at how to avoid a health insurance premium bomb as a freelancer?
Are You a Freelancer? Health Insurance Premium Precautions
As we saw above, the most important thing when it comes to paying health insurance premiums as a freelancer is being careful that your annual financial income does not exceed KRW 10 million. That's because the moment your financial income goes over KRW 10 million, even by just KRW 1, your premiums rise steeply.
So before realizing gains from investments such as funds or ETFs, it's important to factor in taxes and plan carefully when you sell and when you receive dividends.
Understanding the Difference from Salaried Workers
Freelancers and salaried workers have different financial income thresholds. For salaried workers, health insurance premiums are charged only on the amount exceeding KRW 20 million, but for freelancers the threshold is KRW 10 million, so keep this in mind.
This is one of the reasons regional subscribers such as freelancers, sole proprietors and retirees are so sensitive about their financial income. For details on how health insurance premiums are calculated, please refer to the post below.
How Health Insurance and National Pension Contributions Are Calculated and How to Pay Less4 min readInvest Through Tax-Advantaged Accounts: IRP, ISA and Pension Savings Accounts
To reduce your health insurance premiums, you need a strategy of investing through accounts whose returns aren't counted as financial income. For example, did you know that if you invest in funds and ETFs through an IRP account, your capital gains and dividend income don't affect your health insurance premiums?
On top of that, ISAs and pension savings accounts also offer tax-free benefits, so you need a sound strategy for using them.
By using an ISA and a pension savings account, you can enjoy tax-free benefits. If you manage deposits, installment savings, ETFs and more through an ISA, then transfer the money to a pension savings account after maturity and invest it in funds and ETFs, you can greatly reduce your taxes or even pay none at all.
An ISA is an investment account that offers up to KRW 2 million in tax-free income plus separate taxation benefits, and it lets you invest in a wide range of financial products such as deposits, funds, ETFs and stocks. The minimum term is 3 years, after which you can transfer it to a pension savings account and receive tax-free benefits. The annual contribution limit is KRW 20 million, and you can withdraw money when you need it even before maturity. If you're a freelancer, it's a good idea to open an ISA account and make good use of it.
After your ISA matures, you can transfer it to a pension savings account and keep investing. If you then receive those funds as a pension, you only pay a very low income tax (3–6%) on the returns and dividends. However, since it's a pension account, your money may end up locked in for a long time, right? You can learn more in the "Smart Pension Investing" post below.
Keep Up with Health Insurance Premium News
Finally, if you want to avoid a health insurance premium bomb as a freelancer, it's important to keep following news about health insurance premiums. As mentioned earlier, the health insurance premium system keeps changing. Until just a few years ago, the financial income threshold for regional subscribers was KRW 20 million, but it has now been changed to KRW 10 million. A freelancer who doesn't know this and keeps earning KRW 20 million in financial income would be in for a nasty shock when the new premiums are calculated.
So if you want to keep avoiding health insurance premium bombs and cut down on taxes while living as a freelancer, it's important to stay on top of news about the changing health insurance premium system and prepare an appropriate response accordingly.
