[Senior Trend] Even After Retirement, 30-40% of Assets Should Be in Investment Products

What is ‘money’? According to the dictionary definition, money has four meanings. First, it is an object that represents the value of things, mediates the exchange of goods, and is also used as a means of accumulating wealth. Second, it is the price of goods. Third, it is another term for wealth or property, and fourth, it is the cost required to do something. Money is currency, but it also carries situations and emotions. Last weekend, on the way to a meeting place, I encountered a long line. Curious about what was going on, I peeked ahead and found it was a lottery hotspot with dozens of first-prize winners. Everyone was holding cash in their hands, their faces filled with anticipation, which was both amusing and sad.

These days, there is a significant generational gap regarding the depletion of the National Pension. It is a ‘money’ issue for the country caused by aging. Seniors and money issues have come into focus. Besides various measures to increase the fund, some say we cannot rely solely on the National Pension and should also pay attention to private pensions or tighten our belts further. Some even suggest dreaming of a self-sufficient rural life. In any case, when thinking about retirement funds, most people feel anxious. It seems there is not enough money for what is needed after retirement, and managing it is difficult.

This is not a problem experienced only in Korea. According to LIMRA, a U.S. life insurance research organization’s “Retirement Preparation Market: Status Survey,” less than 25% of Americans approaching retirement felt they were sufficiently prepared for old age. Japan, too, was vividly portrayed in the book “Retirement Bankruptcy” by the NHK Special production team, showing the harsh reality of living on pensions alone. They advise saving more while still young, adding insurance to prepare for illness, and preparing thoroughly. In Korea, it is also recommended to secure income-generating real estate.

How much retirement money is actually needed? We have entered a world where the period of retirement life is longer than the period of working life. However, this world is new to everyone. Therefore, there is no absolute numerical answer. Just as living expenses used until age 50 varied greatly, the difference will be large depending on how one has lived so far and how one plans to live in the future. In the book “Not Afraid of Aging,” Japanese retirement planner Yokote Shota says, “At 60, your annual income drops by half, and your work level returns to that of a newcomer.” The point is to understand your economic situation and manage your consumption accordingly, and if health permits, continue working actively for life regardless of the type of work.

The British weekly magazine The Economist predicted, “A healthier and wealthier senior generation will shake up the financial markets,” but unfortunately, a definitive formula for retirement funds is still hard to find. No investment product has yet been encountered that can stably deliver high returns while responding to risks such as inflation and market volatility.

The author believes it is time for a change in thinking. Recently, I agreed with the logic of CEO Kang Changhee, a well-known retirement planning expert. He recommends investing aggressively while adhering to principles. In old age, events that can lead to bankruptcy (financial fraud, children’s issues, illness, etc.) occur frequently, and active responses are necessary. Even if earning little, work longer, save where possible, and manage a portfolio with “financial assets proportionate to 100 minus your age; for those in their 40s, about 60% in investment products, 40% for those in their 60s, and 30% for those in their 70s” is appropriate.

Also, one must study money. Financial products you don’t understand are like lottery tickets. Instead of blindly trusting salespeople and buying impulsively, it helps to compare and read product brochures from banks, securities firms, insurance companies, and asset management firms. In the U.S., statistics show that people who read economic magazines earn nearly twice as much annually as those who do not, regardless of gender. The wealthy tend to subscribe to comprehensive or economic magazines. In Japan, which has aged earlier than us, the number of bestsellers on the topic of ‘money’ has increased sharply. The number one bestseller is a novel called “How to Use 3,000 Yen,” which emphasizes raising financial intelligence through saving and money management. The third bestseller is a book called “The University of Money,” which explains that money has five powers: the power to save, earn, grow, protect, and spend, and that philosophy is needed to use these powers effectively.

With longer lifespans and extended retirement, senior trends are emerging in various fields these days. Let’s no longer fear and prepare a wise senior financial life that steadily nurtures the potential of money.

Lee Boram, CEO of Third Age