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Retirement anxiety is growing among South Koreans in their 40s and 50s. More than 6 out of 10 people in the age group say they are not prepared for old age, despite broad awareness of the need for retirement planning, a new report showed Thursday.
According to the market report released by the Korea Insurance Development Institute, 90.5 percent of people in their 40s and 50s said they feel the need to prepare financially for retirement. However, only 37.3 percent said they believed they had actually done so.
The report, which analyzed insurance statistics, retirement-related surveys and data from multiple institutions, also found that severance pay alone was unlikely to be sufficient to meet major life expenses after retirement.
The average severance pay expected by working professionals in their 40s and 50s was estimated at 167 million won ($116,000).
While most respondents said they plan to use the money primarily for living expenses in retirement, the amount is widely seen as inadequate once the costs of raising their children are taken into account.
Respondents estimated average education expenses for their children at 46 million won, while expected marriage-related costs for children, such as paying for weddings, housing assistance and other support, averaged about 136 million won. Combined, these costs would exceed the typical severance payout, leaving little room for long-term retirement living expenses.
Public pensions were cited as the primary retirement preparation method by 69.5 percent of respondents, while only 6.8 percent said they had private pensions. National Pension Service data analyzed in the report showed that the income replacement rate for old-age pension recipients stood at about 22 percent of average monthly income as of 2024.
In practical terms, a retiree who earned 3 million won per month while working would receive roughly 660,000 won a month from the National Pension, highlighting the system’s limited ability to cover retirees’ living expenses on its own.
The institute warned that such a level is insufficient to maintain living standards in retirement, especially as life expectancy continues to rise.
The institute also called for stronger incentives to encourage participation in private pension plans. More than half of respondents aged 30 to 50 who are still working said they want the tax deduction ceiling for private pension contributions raised.
The average preferred ceiling was 12.6 million won, more than double the current limit of 6 million won.
The institute noted that since tax benefits for pension savings shifted from income deductions to tax credits in 2014, the market for tax-qualified pension products sold by insurers has steadily shrunk. Premium income from such products fell from 8.8 trillion won in 2014 to about 4.5 trillion won in 2024.
“The data suggests that without stronger policy support, many middle-aged workers will be financially vulnerable when they enter retirement,” the report said.
jychoi@heraldcorp.com