[Gold Age 22] Sanggeon Lee "In the Aging Era, Investing in Dollar Assets is Essential"

Population Decline and National Debt Risk Must Be Managed
Bank Deposits Do Not Hedge Against Inflation
Housing Pension Excellent for Creating Cash Flow

Sang-geon Lee, Head of Mirae Asset Investment and Pension Center, is giving a lecture on the theme "The Era of 100-Year Life, Changes in the Asset Market and Life, and Response Strategies" at the 2022 Asia Economy Golden Age Forum held on the 20th at the Bankers Hall in Jung-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Ji Yeon-jin] "Having overseas investment assets as retirement assets is not a choice but a necessity."

On the 20th, Lee Sang-geon, head of Mirae Asset Investment and Pension Center, emphasized this at the '2022 Asia Economy Gold Age Forum' held at the Bankers Hall in Myeongdong, Seoul, hosted by Asia Economy, stating that with the start of population decline in Korea, "the world we will see in the future will be different from the world we have seen so far."

During his lecture titled "Life Changes in the Asset Market in the 100-Year Life Era," Lee explained that Korea's economy may experience ups and downs depending on the economic situation of the US, the country of the key currency, and therefore it is necessary to hold dollar assets. He said, "The investment keyword in the low-interest, aging era is cash flow," and added, "When investing overseas, a certain portion of assets such as dollar bonds or dollar stocks should be held in dollars."

He diagnosed that Korea's current economic landscape is characterized by the retirement of the baby boom generation (born 1955-1974) after the Korean War and an unprecedented low birthrate (birthrate of 0.81% in 2021), resulting in an increased elderly population.

He pointed out that this aging era could lead to a reduction in government welfare benefits such as national pension and health insurance premiums due to 'longevity risk' from unprecedented long life caused by advances in science and technology, 'interest rate risk' due to inflation, and 'fiscal crisis risk' that may arise as national debt increases.

For example, health insurance expenses sharply increase from age 75, and if 16 million people born in 1955, the start of the baby boom generation, spend on hospital bills for 20 years after turning 75, it could cause problems in health insurance finances. He said, "There will be welfare controversies, but the government's ability to help will decrease," and added, "A government without money has no choice but to strengthen taxes, so fiscal crisis risk must be managed."

Therefore, he explained that retirement preparation requires a cash flow-centered strategy. He said, "If you only have one apartment worth 5 billion won and no cash at all, cash flow based on labor income will stop in retirement, so you need to convert assets into those that can generate cash flow," and added, "One of the retirement risks is that the time of death cannot be determined, but housing pensions are excellent because they provide pensions until death."

He also said, "Since the 1997 foreign exchange crisis, Korea's money supply has increased significantly, and as labor costs have risen in this process, inflation must be actively managed," adding, "Bank deposits are vulnerable to inflation risk. Since it is impossible to guarantee principal and hedge inflation simultaneously, active management is necessary."