[How Is Your Dream] Old People in Poor Countries, Overcome the 12-Year 'Income Crevasse'

Reliable Retirement Income Security 'Pension Reform'
Half Have No Income for 10 Years After Retirement
Elderly Suicide Rate Twice the National Average

[Asia Economy Reporter Choi Daeyeol] Mr. K, a worker in his 50s at the tail end of the first baby boom generation, is revising his post-retirement financial plan that he made a few years ago. His son's expensive overseas study is over, but when he tried calculating to help his son, who is about to get married, with a jeonse deposit, it seemed quite challenging. He also changed his plan to retire at the end of last year and decided to work until the mandatory retirement age, as there will be about a four-year gap before receiving the national pension. Mr. P, a peer of the same age, sees this as a 'well-off' concern. As a self-employed person, he had not specifically prepared for retirement, but his restaurant, which he had run for over ten years, was somewhat stable, so he was not in a tight financial situation. However, due to the spread of COVID-19 last year, he lost most of the money he had saved.

10 Years After Retirement, Half Survive Without IncomeTwo-Thirds Say "Retirement Funds Are Insufficient"

The term "crevasse," which refers to a large crack in a glacier, is used to describe the period after retirement when there is no steady income until pension payments begin. According to a survey conducted last year by a financial company targeting 1,000 retirees living in the metropolitan area and major metropolitan cities, the average duration of this "income crevasse" period is 12.5 years. This means that if there is no income or adequate assets, there is a high possibility of enduring a lean period for over ten years.

Elderly people are waiting to receive meals near Tapgol Park in Jongno. Photo by Moon Honam munonam@

The typical exit from their main job occurs in the late 40s or early 50s, but only slightly more than half found work through reemployment or self-employment, while 45% were not economically active. When asked whether they had sufficiently prepared retirement funds, about two-thirds answered "insufficient."

Jumi Lee, a senior researcher at the Korea Institute for Health and Social Affairs, explained, "The stability of jobs for middle-aged and older workers in their 50s, as well as factors such as expertise, gender, company size, and changes in family structure, affect elderly poverty after age 65. To address this, policy support is needed to reduce disparities based on occupation and company size, and systems to support women vulnerable to changes in family structure."

World’s Highest Elderly Poverty, Bleak FutureSuper-Aged Society, 4 Young People Support 1 Elderly Person

Korean elderly are poor. According to the Organization for Economic Cooperation and Development (OECD) statistics, the elderly poverty rate in Korea is 44%. This means that out of 100 people, 44 live below the poverty line, which is half of the median income (the income of the household in the middle when all households are ranked by income). This is the highest among OECD member countries and more than three times the average (13%). The elderly suicide rate per 100,000 population is 59, more than twice the national average suicide rate (25). It is also three times the OECD average elderly suicide rate (19). Even if the cause of suicide is not solely attributed to poverty, this indicator shows how bleak the reality faced by Korean elderly is.

According to Statistics Korea, the proportion of people aged 65 and over in the total population of Korea increased from 7.2% in 2000 to 15.7% last year, more than doubling in 20 years. If the current trend continues, the population aged 65 and over is expected to reach 25% in 2030 and about 34% in 20 years. The rate of decline in newborns is also accelerating, so the elderly dependency ratio is expected to grow like a snowball. The elderly dependency ratio is an indicator that compares the proportion of elderly people aged 65 and over to the working-age population (15-64 years old), estimated to be about 23.0 this year. This roughly means that four young people support one elderly person. This figure is expected to reach 91.4 by 2060.

Neglected Pension ReformLivelihood Benefits and Basic Pension Insufficient to Alleviate PovertyGovernment and National Assembly Must Propose Strengthening Public Pensions

Various income security systems exist for a minimum dignified life, but they are insufficient. This year, the obligation for support persons was abolished for elderly and single-parent beneficiary households, allowing them to receive livelihood benefits if they meet certain criteria, but the newly eligible households number less than 160,000. The basic pension coverage has also expanded to the bottom 70% of income earners, but it is far from enough to solve elderly poverty. Livelihood benefits provide 520,000 KRW per month for single-person households, and the basic pension offers up to 300,000 KRW. Some use retirement pensions or private pensions from financial companies, but this is limited to a portion of the upper-middle class with saving capacity. This is why there are calls to strengthen public pensions, including the national pension, which most of the economically active population is enrolled in.

In October 2018, Moon Sung-hyun, Chairman of the Economic, Social and Labor Council, delivered a greeting at the 1st plenary meeting of the Special Committee on National Pension Reform and Old-age Income Security held in the main conference room of the Economic, Social and Labor Council. Photo by Moon Ho-nam munonam@

Calls to revise public pensions to provide effective support for the elderly have been made in the past, but neither the government nor the political sphere responsible for this have dared to take action. Past reform proposals involved either increasing premiums or reducing future benefits, both of which inevitably face strong opposition.

Although discussions on pension reform have emerged from various sectors, actual implementation has mostly been limited to reducing the income replacement rate (the ratio of pension benefits to individual income) or delaying the payment age. In 2018, the Presidential Economic, Social, and Labor Council formed a special committee on pension reform and old-age income security, but it failed to produce a single plan and only narrowed down three options. Since then, for over a year, there has been little discussion in the National Assembly or government, which hold the key to reform.