A 29-year-old high school teacher surnamed Ko in Seoul started a variety of savings when she begun her career in 2011. From personal annuity savings to a housing deposit account, Ko regularly saves about 1 million won ($850) in total every month.
Her personal annuity savings will allow her to receive 300,000 won per month from the age of 55 if she successfully accumulates 300,000 won every month for the first 10 years.
As she works as a private school teacher, she was also eligible to join the Teacher’s Pension. Saving 200,000 won a month, she will be able to receive a certain amount of monthly pension after she retires. The amount varies depending on the employment term and the retirement age.
“I thought it would be better to subscribe to any savings programs just to prepare for the unpredictable future. It’s also never too early to start getting ready for the postretirement life as the life expectancy is getting higher,” Ko told The Korea Herald.
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Senior citizens take a rest at Jongmyo Park in Jongno, Seoul. (Yonhap) |
As the Korean economy remains stagnant amid growing concerns over elderly poverty, more salaried workers are attempting to look for savings or pension packages in order to make sure of their postretirement life.
As of last year, the number of elderly in Korea reached 13.1 percent, with 6.62 million senior citizens, according to the government’ data.
The latest Organization for Economic Cooperation and Development’s Economic Survey of Korea projected that its population ageing will likely be the fastest among OECD countries by 2050.
Along with the rising number of senior citizens, the elderly poverty rate is also surging.
According to the Korea Institute for Health and Social Affairs, about 47 percent of the Korean elderly population were found to live in poverty due to having income of less than half of the median national income as of 2013. This is 3.5 times higher than the national average of 13.7 percent.
KB Financial Group Research Center’s recent report showed that Koreans need an average monthly income of 2.26 million won for postretirement expenses. In reality, however, they only have a monthly income of 1.1 million won on average. The figure was calculated based on the individual savings and pension plans of some 2,900 Koreans.
Married couples were more vulnerable to postretirement income risks as many tend to support their children’s education and wedding costs with their retirement savings, the report said.
Drawing up strategies is crucial for salarymen to avoid financial difficulties after they retire, experts said.
“In order to better prepare for postretirement life, it is important to make distinguished savings or pension plans depending on age,” said a Shinhan Bank official.
For those in their late 20s or 30s who just started their careers, a long-term installment fund is recommended as some programs deduct income taxes.
For instance, a long-term tax deduction fund could allow tax deduction of 40 percent of payment, up to 6 million won a year. This helps young workers better gain seed money, experts said.
Those in their 40s and 50s often spend large expenses on their children’s education right before their retirement. Experts pointed out that they need to balance spending for children with preparing for postretirement, and avoid high-risk investment packages.
Rather than direct investment, it is safer to invest money in stable assets such as raw materials or gold through derivative linked securities.
For the elderly, “asset protection” is more important than investments.
Homeowners aged 60 or older may join reverse mortgages, which is a type of home loan that requires no mortgage payments. Based on the housing value, life expectancy and potential increase in the value of the property, homeowners are given a monthly pension until they die.
Critics stress that the earlier they subscribe to a reverse mortgage, the more beneficial, as the initial housing price is one of the key factors that determines the monthly amount they can receive.
By Lee Hyun-jeong (
rene@heraldcorp.com)
