"Life Expectancy Over 21 Years, Retirement Assets Decrease... Need for Pension Withdrawal Plan"

Mirae Asset Investment and Pension Center Publishes Investment and Pension Report No. 56

[Asia Economy Reporter Hwang Yoon-joo] As the life expectancy of Koreans has increased by 21 years and situations such as inflation and investment losses have led to a decrease in retirement assets, advice has emerged on the need to manage retirement funds.

Mirae Asset Investment and Pension Center announced on the 28th that it has published Investment and Pension Report No. 56, titled "Establishing Withdrawal Plans and Utilizing Withdrawal Policy Statements for Retirement Preparation."

This report reviews the risks retirees may face while managing their retirement funds and presents ways to utilize a "Withdrawal Policy Statement" to prepare for these risks.

According to the report, the life expectancy of Koreans has extended from 62.3 years in 1970 to 83.5 years in 2020, an increase of 21.2 years over 50 years, which has increased the proportion of the "withdrawal period" in the economic life cycle. Retirees now need to prepare for risks that may arise during the withdrawal period, such as having to divide their assets over a longer time.

The main risks during the withdrawal period include ▲longevity risk ▲inflation risk ▲sequence of returns risk (risk related to the order of investment returns). Longevity risk refers to the extension of the post-retirement period due to increased life expectancy, inflation risk refers to changes in purchasing power due to price fluctuations, and sequence of returns risk refers to the reduction of retirement assets due to investment losses.

The report advises that to manage these risks, retirees should systematically establish withdrawal plans in advance. Retirees need to set specific conditions on how to withdraw and manage their retirement funds according to their goals.

A way to more easily establish withdrawal plans is to utilize a Withdrawal Policy Statement (WPS). The Withdrawal Policy Statement is defined as the retiree’s "withdrawal management guideline." Through the WPS, retirees can set goals and detailed withdrawal plans to create guidelines for managing their retirement funds.

Researcher Park Ji-hye of Mirae Asset Investment and Pension Center said, "By using the Withdrawal Policy Statement to establish withdrawal plans, retirees can respond to various economic changes and manage financial risks systematically while withdrawing income, thereby increasing the sustainability of withdrawals," adding, "It is important to continuously check the checklist for managing withdrawal plans through the Withdrawal Policy Statement."

Meanwhile, Investment and Pension Report No. 56 can be downloaded from the Mirae Asset Investment and Pension Center website. Additionally, a video summarizing the main contents titled "5 Steps to Establish a Retirement Fund Withdrawal Plan" is available on the YouTube channel Investment and Pension TV.