A staggering 81 percent of South Koreans risk facing an income drought after retirement. (Image courtesy of Korea Bizwire)
SEOUL, Apr. 29 (Korea Bizwire) – A staggering 81 percent of South Koreans risk facing an income drought after retirement, according to a recent survey, essentially equating retirement with poverty for a large segment of the population.
The survey by the Korea Insurance Research Institute (KIRI) revealed that over 80 percent of non-retirees are ill-prepared for the income gap they will experience after retiring.
Only 12 percent of respondents said they were adequately preparing, while 6.7 percent claimed they did not need to prepare at all.
The outlook is further exacerbated by the government’s plan to gradually raise the retirement age for receiving the national pension from 60 to 65 by 2033 to ensure the long-term financial viability of the program.
Those born in 1953 or later already face a retirement age of 61 for the national pension, while those born after 1969 will not be eligible until age 65.
The Korea Employers Federation has expressed concern that with the typical retirement age for middle-aged workers remaining in the early 50s, the increase in the national pension eligibility age could significantly prolong the post-retirement income gap.
According to the KIRI survey, non-retirees cited the national pension as their expected primary source of income after retirement, with most planning to claim benefits at the normal eligibility age.
This approach heightens the risk of a severe post-retirement income shortfall, the institute warned.
“Most respondents lack awareness and preparedness for the income gap after retirement,” said researchers Oh Byeung-kuk and Byun Hae Won.
They noted that while applying for early national pension benefits could provide a stopgap, recipients would face reduced payments, a factor that requires careful consideration.
The researchers emphasized that private pensions, including retirement pensions, personal pensions, and reverse mortgages, can begin paying out as early as age 55, potentially mitigating post-retirement income gaps.
However, they found that most survey respondents underutilized private pensions, calling for government support policies and the development of pension products better tailored to customer needs.
Financial experts widely recommend a three-pillar strategy for retirement planning: relying on the national pension for basic living expenses, utilizing retirement allowances or pensions to maintain a standard lifestyle, and supplementing with personal pensions to cover any remaining income needs.
Tax-deferred savings vehicles like pension savings accounts and individual retirement pensions (IRPs) are popular personal pension options.
Multiple financial advisors pointed out that assuming a typical South Korean retirement age of 55, most retirees face an income “crevasse” of around 10 years before becoming eligible for the national pension.
“Leveraging private pensions can boost income replacement rates and help bridge this gap,” they stressed.
As skepticism grows over the national pension’s adequacy for retirement, more workers are turning to personal pension products like savings plans and annuities to supplement their preparations.
Financial experts advise that even modest personal pension contributions made at a younger age can provide significant long-term economic benefits.
As income levels rise, additional contributions can be made. Early subscribers can also take advantage of lower administrative fees and favorable actuarial updates every five years.
M. H. Lee (mhlee@koreabizwire.com)
