South Koreans in their 40s and 50s are growing anxious about their retirement and old-age preparedness. More than 60% of the Koreans participating in a study on retirement planning and allied topics revealed that they are not prepared for old age, despite broad awareness of the need for retirement planning.
According to a new market report released by the Korea Insurance Development Institute, 90.5% of people in their 40s and 50s said they do feel the need to prepare financially for retirement; however, only 37.3% said they believe they have actually done so.
The report analysed data from various sources and found that severance pay alone was unlikely to be sufficient to meet major life expenses after retirement. In South Korea, the average severance pay currently expected by working professionals in their 40s and 50s is estimated at KRW167m ($113,102).
The majority of the respondents said they plan to use the severance pay for living expenses in post-retirement; however, the amount is considered inadequate once the costs of raising children and their wedding is taken into account.
At the current level of living expenses, the study estimated that average education expenses for children amounted to KRW46m, while expected marriage-related costs for children averaged about KRW136m. These two types of expenses would consume almost the entire severance pay, leaving little room for long-term retirement living expenses.
Public pensions were cited as the primary retirement preparation method by 69.5% of respondents, while only 6.8% said they have private pensions. National Pension Service data analysed in the report showed that the income replacement rate for old-age pension recipients stood at about 22% of average monthly income in 2024.
The institute said that this level of pension savings may not be sufficient to maintain living standards in retirement, especially as life expectancy continues to rise.
The report called for stronger incentives to encourage participation in private pension plans. It said that more than half of respondents aged 30 to 50 who are still working said they want a higher tax deduction ceiling for private pension contributions and the average preferred ceiling is KRW12.6m, more than double the current limit of KRW6m.