"A Big House for Two... Downsizing to Prepare for Golden Retirement with the Remaining Money" [Turning My Home into a Senior House]

After moving, use the difference as retirement living expenses
Increase the limit for putting moving difference into personal retirement pension

Noh Young-geun (66) and Joo Young-rye (65), who live in Yongsan-gu, Seoul, stand side by side in their living room. Mr. Noh plans to move to a smaller house and use the difference to support his retirement. Photo by Kang Jin-hyung

"After sending all my children off to get married, the house feels empty. This place is 43 pyeong, but there are two unused rooms. We only use the master bedroom and one small room."

No Young-geun (66), a grandfather living in an apartment in Yongsan-gu, Seoul, is currently considering moving to a smaller unit. Coincidentally, a 59㎡ (25 pyeong) apartment became available in the building next door. "I asked the real estate agent, and the difference between our current place and that one is about 400 million won. I’m thinking of using the difference as living expenses for retirement after moving. What’s the point of living in this big house with just the two of us? We should travel once more while we’re still healthy."

After moving, use the difference as retirement living expenses

While a large house is necessary when raising children, it becomes a burden after they leave home. This is not just Mr. No’s issue; it is a common concern among elderly people living in large apartments. "Wouldn’t it be more comfortable to move to a smaller home than now?" "How can we wisely use the difference gained from moving?"

Australia provides clues to these questions. Like Korea, Australia is experiencing rapid aging and real estate accounts for most personal assets, but its 'housing downsizing' policies are more comprehensive than ours. In Australia, when elderly people move to a smaller home, the difference in price can be deposited into a personal retirement pension (IRP) account.

For singles, the limit is 300,000 Australian dollars (about 270 million won), and for couples, 600,000 Australian dollars (about 540 million won). The IRP is a savings product for retirement living expenses, managed in forms such as deposits, savings, funds, and bonds. From age 55, a fixed amount can be withdrawn monthly. It also offers tax deduction benefits, reducing tax burdens.

The active 'housing downsizing' in Australia is a survival strategy that middle-class elderly in Korea can emulate. According to last year’s Household Financial Welfare Survey by Statistics Korea, 82% (449 million won) of assets owned by those aged 60 and over (548 million won) are real estate. Among these, the proportion of owner-occupied housing is 58% (260 million won). In an ultra-aged society where middle-class elderly cannot solely rely on national welfare, housing downsizing can provide living expenses.

Professor Choi Kyung-jin of the Department of Business Administration at Gyeongsang National University, interviewed by Asia Economy on December 13 last year regarding housing downsizing. Photo by Yoon Dong-joo

Professor Choi Kyung-jin of the Department of Business Administration at Gyeongsang National University, who has researched housing downsizing, said, "Although the number of people subscribing to housing pensions, which allow using the house as collateral to receive living expenses, is increasing, many elderly hesitate to join because of the Korean sentiment of attachment to 'owning a home.'" He added, "A downsizing policy that allows elderly to maintain their home while putting the difference into an IRP to secure living expenses should be established." Furthermore, he noted that if elderly move within the same neighborhood, the burden of unfamiliar environments would be minimized.

Increase the limit for putting moving difference into personal retirement pension

Korea also introduced a similar system in January last year. However, the limit for the downsizing difference that can be deposited into a pension account is only 100 million won. Considering apartment prices in the metropolitan area, this limit is far too low. It is insufficient even for retirement preparation. Professor Choi said, "Like Australia, the criteria should be subdivided for singles and couples, and the limit for individuals should be increased to 300 million won so that they can receive about 1 million won monthly for 25 years."

Support to reduce capital gains tax and acquisition tax when elderly move is also necessary. Taxes are a major obstacle that makes elderly hesitate to move. Professor Choi said, "For example, if tax benefits are given only when downsizing for 'single-home owners with official property prices under 1.2 billion won,' applying only to middle-class elderly would not cause fairness issues."

For the housing downsizing system to take root, there also needs to be places where elderly can receive counseling on "how much money they can actually get after moving." Professor Choi advised, "Wealthy elderly can get consultations at bank VIP counters, but middle-class elderly have no place for asset consulting. If senior welfare centers run by city or district offices provide consulting, it would help activate downsizing."