Pay Me First Principle Essential for Happy Retirement
Longevity is a blessing, but only if you are prepared for it. In a rapidly-aging country, however, many people see a long post-retirement as a problem.
MetLife Insurance Korea has been emphasizing ``post-retirement financial planning'' for some time. Its CEO, Kim Jong, explained why in an interview with The Korea Times.
``Most experts in the relevant field agree that Korea will experience a rapid change in its demographic structure, with its life expectancy rising and its birth rate declining. In fact, according to the Korean government's recent population estimates, Korea is expected to join the world's oldest nations, which includes Japan, Italy and Spain, by 2050, when its elderly population is expected to account for as much as 38 percent of the entire population,'' Kim said.
However, most people only worry about the retirement ― without taking any action. Life insurance companies are there to help them set up action plans.
``In connection with the rapid aging in Korea, the biggest problem is that our retirement system is not sufficient to address issues associated with aging. In fact, an adequate pension system should be in place to provide sufficient support to the elderly so that they don't cause an excessive burden to the younger generations, but such a system is not in existence or expected to be,'' the CEO said.
``In addition, though it is true that most of the nations in the world are having difficulties in institutionally addressing the issue of aging, except for some developed nations in Europe, it is also true that the aging is simply too fast in Korea,'' he added.
Kim said that the hard reality here is that people cannot afford to count on the government for a solution to the unprecedented pace of aging. Instead, each needs to prepare for his or her own post-retirement life.
Retirement and Happy Retirement Life
Kim cited a public awareness survey conducted by a Korean government agency in 2006, in which 80 percent of the Korean population was seriously aware of the issue of aging and 74 percent had concerns about their post-retirement life.
``Because of the rapid pace of aging in Korea, two of the hottest key phrases in the Korean society going forward will be 'retirement' and 'happy retirement life.' All people dream of a rich and happy retirement life and wish to retire when they have made sufficient preparations for such a life but the reality is that, all too often, people face their retirement in an abrupt and unexpected manner.''
He cited rising spending for their children, including education expenses, as one of the hurdles against adequate preparations for retirement. ``Concerns are mounting that quality of life will deteriorate sharply after retirement because of the lack of an adequate social security system. In addition, even if some assets are prepared for post-retirement, it will still be difficult for people to retain the same lifestyle as before retirement because of their lack of ability to manage assets properly.''
He said MetLife Korea has made consistent efforts in anticipation of these huge changes associated with aging.
For example, the insurer established the Financial Planning (FP) Center to provide consulting services based on comprehensive financial planning and retirement planning. It was also selected as an agency for the Associate Financial Planner Korea (AFPK) certification, in recognition of its competitiveness in comprehensive financial service education, which includes retirement planning.
Retirement Planning Professional Development Program
One of its most notable programs is the ``Retirement Planning Professional Development Program,'' jointly run with Seoul National University.
Kim said it sets MetLife Korea apart from other insurers in the retirement market. ``It is impossible to create a financial firm specializing in retirement planning simply by means of annuity brand advertisements or marketing initiatives. If you take on the retirement planning service without adequate preparations, chances are that you will end up damaging your customer value seriously.''
He said one should provide customers with retirement planning professionals who are capable of providing full financial and non-financial planning and consulting services in connection with retirement and overall post-retirement life. ``The key to a successful retirement planning-specialized financial firm is to secure many professionals with differentiated capabilities, by means of making full preparations over a long period of time,'' the CEO said.
``For this reason, MetLife Korea has pursued ways to provide a program to develop professionals in retirement planning,'' he said, explaining how it reached an agreement with Seoul National University to run the ``Retirement Planning Professional Development Program.''
The program is a three-month course hosted by the university's Institute on Aging and Living Science Institute. It is provided to the insurer's financial services representatives (FSRs) and other employees. ``For a period of two years, MetLife plans to produce a total of 2,400 retirement planning professionals from this program,''' he said, adding that the program will be extended to produce more professionals, as it is widely considered a very successful course by the firm, the university and the program participants.
He stressed that it is not a typical outsourced education program but a new industry-university cooperation model in which the entire process, from course materials development to lectures, has been jointly developed, based on their joint in-depth research into specialized retirement planning courses offered in the United States and other advanced markets.
It combined academic research from a university and actual working cases from a life insurance company. ``It focuses on developing skills required in providing comprehensive retirement planning services as well as extensive knowledge in such diverse matters related to retirement and aging as finance, health, housing, family relationships, social issues and psychological and physical changes,'' Kim said, adding that the program is different from others in that it approaches retirement from the perspective of everyday lives, not simply from the financial perspectives.
Stability Key to Survive Crises
MetLife Korea, which marks its 20th anniversary this year, fared better than others last year despite the global financial crisis, recording 109.3 billion won net profit, which put it in the top fourth of the life insurance industry.
In particular, the firm's solvency ratio, the key indicator of an insurer's financial soundness, marked 268.8 percent, one of the highest ratios in the industry.
The CEO said that stable investment was key for the insurer's success. ``Marketing isn't everything in difficult times. One should make stable investments. We avoided risky investment, managing our assets in a stable manner,'' Kim said.
``If the customers were thinking only of making profits, they would have gone to securities companies or mutual funds. Insurance companies should be different.''
Kim expects the life insurance industry to face a new era of competition for survival, with boundaries between financial sectors disappearing and competition between different financial sector players intensifying, as the Capital Market Consolidation Act takes effect and associated changes in the insurance system become more visible.
Act Now, Pay Me First
Kim advises that those who are worried about retirement should remember the mantra: ``Pay me first.'' ``When people get salaries, they pay for the credit card bills, make installment payments for cars and others. But they should first think, Did I make an installment payment for myself?''
He said ``Pay me first'' should be the principle of retirement preparation. ``No matter how much you make, or how old you are, you should know how much you should save now for the 30 years that you need to survive without income. I would like to advise you to start right now.''
The CEO said MetLife would continue focusing on the retirement market. ``Going forward, MetLife Korea will make more efforts to become a faster-growing life insurer on the back of a sound financial position. We will concentrate our core competencies on developing competitive new products such as variable annuities tailored to the rapid aging trend in Korea, pursuing growth opportunities in the life and retirement pension markets and offering more advanced products and services to help customers successfully plan for their post-retirement lives and realize their financial freedom.''