Are You Prepared for Three Risks in Life?
By Stuart B. Solomon
President and CEO, MetLife in Korea
Each of us dreams of making a success of our lives. Some people dream of making a fortune, reaching a high position, or achieving fame in academia or society, while others dream of making a difference in the cultural, arts, or athletic community.
No matter what your dream is, your life cannot be considered successful if you fail to prepare against, and effectively manage, the three risks that every one faces in life without exception: unforeseen death, illness and outliving your assets.
First, you need to prepare for the possibility of illness and disability. According to research conducted by MetLife Mature Market Institute, you may need to pay an average charge of $206 per day for a fully cared nursing room in the United States, totaling over $75,000 per year. The Institute's research also finds that if you leave your job to care for a family member, you may lose up to $650,000 in lifetime income opportunities.
The situation in the United States is not so different in Korea. As Korean society ages, the social costs of long-term care grow. One good rule: You must start to protect your health when you are still healthy. The earlier you start doing so, the less damaging your illnesses, if any, may become.
You also need to prepare to mitigate the risks of death and longevity. According to a 2007 study on Aging Korea by the Center for Strategic and International Studies, Korea is expected by 2050 to become the oldest nation in the world, as over half of its adults will be 60 years of age or older and the number of people celebrating 90th birthdays each year will exceed the number of new births.
A long life without adequate financial backing may prevent one from enjoying a happy life in retirement. Currently, Koreans are generally expected to live to over 78 years, which means that they could live at least 20 years or more after retirement. Furthermore, only 44 percent of senior citizens in Korea are living with their children these days, compared with 81 percent in 1980. Currently, the poverty ratio among senior citizens is three times that of younger generations.
These findings could indicate that the family system that used to protect older generations after retirement in Korea is now collapsing. Clearly, older people's lives after retirement have become more vulnerable than ever.
If you do not prepare to mitigate these risks in advance, your retirement life may be far less than you hoped for in your younger years. How can you plan to ensure that your retirement dreams come true?
Generally, financial planning for post-retirement life involves a three-tier system that combines a public pension program, e.g., the National Pension, a corporate pension program, and a private pension program. This three-tier system, however, has yet to become commonplace in Korea.