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By Lee Hyo-sik
Many senior citizens here are facing financial hardship after retirement as they fail to make adequate preparations for post-retirement life while economically active.
They spend the bulk of their income on educating their children and foot the bill for their weddings. Most of their lifetime savings have been poured into the apartment where they reside, leaving them little cash to spend.
Worse, many of them paid little attention to state or private pension schemes, forcing them to continue to work after retirement as they are absent of a stable cash inflow.
This is exactly how the post-retirement life of the average Korean aged over 65 is described in a study released Tuesday by the National Pension Research Institute (NPRI). It is affiliated with the state-run National Pension Service.
The institute said senior citizens here are exposed to the highest risk of falling into poverty after retirement, compared to those in other Organization for Economic Cooperation and Development (OECD) member countries, due largely to a lack of public pension schemes.
The average Korean senior citizen received only 66.7 percent of the income earned by an average household in 2011, the second lowest among 30 OECD member economies. Only the elderly in Ireland showed a higher risk of plunging into poverty as they received 65.9 percent of the average household income.
Mexico was found to be the country where senior citizens were best off financially in comparison to the rest of the population as they received 97.1 percent of household income on average.
Austria came in second at 96.6 percent, followed by Luxemburg at 96 percent, Poland at 94.7 percent and France at 94.5 percent.
Senior citizens in Japan were found to be better prepared financially than their Korean counterparts as their income reached 86.6 percent of that of an average family.
The institute pointed out that the lower income level of Korean senior citizens is largely due to the inadequate public pension system, which acts as a social safety net for the elderly.
``Public pensions accounted for 86.7 percent of an average French senior citizen’s income in 2011. Income earned through labor only accounted for 6.4 percent of the total,’’ NPRI researcher Seok Sang-hoon said. ``In contrast, earned income through working accounted for 58.4 percent of the money received by an average Korean over 65. Only 15.2 percent of their income came from state pension providers.’’
Seok said many senior citizens here do not receive a state pension and even if they do, the amount is not substantial. ``This is because many Koreans are self-employed, running restaurants, coffee shops and other small, independent businesses. They often skip making contributions to pension schemes or stop paying all together when the economy is bad.’’
Lacking a stable cash inflow after retirement, many have no choice but to find work or open a shop to make ends meet.
The institute said due to the inadequate state pension system, those aged 64 to 77 are three times more likely to fall into poverty compared to the rest of the population.
``In line with Korean senior citizens’ high risk of falling into poverty, the poverty rate among the elderly was 45.1 percent in mid-2000, the highest among OECD economies,’’ Seok said.
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