[Square] Living Comfortably and Happily in Retirement with a 'Lifetime Salary'

Jungbae Park, Executive Director of the Fund Headquarters at Korea Housing Finance Corporation. Photo by Korea Housing Finance Corporation

In today's era of living to 100, many of us are concerned about how to spend the latter half of our lives after retirement. While we think about planning our lives in advance to spend our old age healthily and happily, it is often overwhelming to know what to prepare, when, and how. According to a study by a research institute, about half of elderly households in Korea have not properly prepared for their old age, indicating that many face retirement without adequate income and become lethargic. It would be ideal to keep working and earning a salary as long as health permits, but eventually, one must pass the position on to younger generations.

How wonderful it would be if someone paid me a lifelong salary. Although it seems impossible, there is a way to have a lifelong income similar to a salary. That is by utilizing the Housing Pension. The Housing Pension is a financial product guaranteed by the government that allows you to receive monthly living expenses like a salary for life by using the house you live in as collateral. The collateral value of the house, assessed at the time of enrollment, is paid out monthly in the form of a pension for life, and the pension continues to be paid until both spouses have passed away.

Especially, the trust-type Housing Pension launched last June allows the housing ownership to be entrusted to the corporation, so even after the subscriber’s death, the surviving spouse automatically inherits the Housing Pension, alleviating concerns about the living expenses of the surviving spouse. However, some may worry about what happens if they live longer and use more Housing Pension than the value of the house, or if they will be asked to pay the difference, as nothing in life is free. But if a loss occurs, the corporation bears the cost. As with any benefit that has many advantages, there are eligibility requirements to join the Housing Pension. The owner’s house must have a publicly announced price of 900 million KRW or less, and the subscriber must be a single-homeowner residing in that house. Even if a multi-homeowner has properties valued under 900 million KRW, only one house where they reside is eligible.

However, some might question, “It’s great that monthly living expenses come like a salary, but sometimes we need more money and sometimes less. If the pension is fixed monthly, wouldn’t that make retirement only half as happy?” For such people, the corporation recently launched new Housing Pension products with more flexible payment methods: the ‘Initial Increased Type’ and the ‘Regular Increased Type’ Housing Pensions. Previously, the ‘Fixed Amount Type,’ which pays the same amount monthly for life, was common. With these new products, you can receive more at the beginning and less later, or less at the beginning and more later, depending on your circumstances.

If you have high expenses initially and want to receive more than the fixed amount for a certain period, you can choose the Initial Increased Type. This can help if you have insufficient income after retirement before receiving public pensions or if your living expenses are high at first. The Regular Increased Type Housing Pension increases the pension amount by 4.5% every three years, suitable for those worried about purchasing power decreasing due to inflation. How blessed it is to be able to use your assets to take control of your own retirement.

The current average life expectancy of Koreans is 83 years, which has increased by 17 years over 40 years since 1980 when it was 66 years. In another 40 years, life expectancy may exceed 100 years, making living to 100 a common occurrence. If you have not yet planned for your long remaining retirement, why not consider using the Housing Pension with the house you live in? I recommend joining the Housing Pension, a treasure trove that pays monthly living expenses like a lifelong salary.

Park Jeong-bae, Executive Director, Fund Headquarters, Korea Housing Finance Corporation