June 24, 2023 08:20
Most Koreans worry about growing old and poor, though few are fully prepared for old age.
When pollster Tillion Pro surveyed 5,023 adults last week, 42.9 percent said they are inadequately prepared financially for old age, while 17.9 percent admitted they are totally unprepared.
They naturally worry how they are going to cope. One office worker in his 50s said, "I need at least W2 million a month just to put food on the table, and I'm worried that the amount I have saved up will not be enough in retirement. I regret not saving more when I was younger."
People have different ideas of their life after retiring from a salaried job and how to prepare for that phase. Absent an effective social safety net, the key is to maintain a certain level of assets in old age and ensure that they last until death.
What happens if the lifespan of a person's assets fail to match their average life expectancy? The lifespan of those assets somehow needs to be extended, but how? Many people either postpone retirement and work longer, ask their children to support them or maximize returns on assets.
Selling a large home once the children have left and moving into a smaller place is an attractive option in Korea, where real estate investments command hefty returns. Cutting down on spending may also be on the cards.
It is difficult to give a uniform figure when it comes to living expenses after retirement, but a decreased level of activity in old age usually means people spend less money than when they were young.
According to Statistics Korea, a retired couple need W3.14 million a month just to cover their living expenses (US$1=W1,304). That means they have to input their own estimate of earnings after retirement given that return on interest is not likely to be more than three to four percent. Higher interest rates are available for riskier investments, but they also entail bigger losses and are not recommended.
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