Few Baby Boomers Ready for Retirement

Baby boomers born between the end of the Korean War in 1955 and 1963 are beginning to reach retirement age, but though the first batch turn 55 next year, few are financially prepared for retirement.

According to the National Pension Corporation on Dec. 15, one in two baby boomers may not get national pension benefits. Only 3.5 million or 47.7 percent of the baby boomers aged between 46 and 54 are eligible for pension benefits. The figure reaches 61.8 percent if those exempt from monthly payments are taken into consideration.

This means nearly half the baby boomers will face retirement without national pension benefits, even considering that 4-5 percent of them are likely subscribers to other pension schemes, such as the government, private school teachers' or military pension programs.

Nor do the boomers have fortunes stashed away. Experts speculate that they will become poor the moment they retire as they have not amassed no assets for their old age.

According to 2009 figures released by Statistics Korea, those aged between 40 and 49 held net assets worth a mere W302.6 million (US$1=W1,171) on average as of 2006. Of the amount, real estate is worth W226 million, meaning that most of them have only a house as property and hold financial assets of a mere W67.43 million in savings, trust funds, or insurance policies. By contrast, they are indebted for W49.43 million on average. If they get severance pay of W67.48 million, they will end up with financial assets worth W85.48 million after their debts are paid off.

How much money they will need after retirement varies significantly depending on calculations by different organizations. In a report in 2006, the LG Economic Research Institute speculated that those aged between their 30s and 50s would need at least W400-500 million at the time of their retirement if they want to spend their old age without much difficulty.

The baby boomers are also top targets for corporate restructuring. "Many of the baby boomers retire when they turn around 45," said Yoon Suk-myung at the Korea Institute for Health and Social Affairs. "Some of those who have survived competition remain on the job, but many retirees have lost all their retirement funds after starting a business on their own and live in straitened circumstances."

The 7.12 million baby boomers account for 14.6 percent of the population. Those who will retire at age 55 between 2010 and 2018 will account for 19 percent of all wage-earning workers, the Ministry for Health, Welfare and Family Affairs expects. Experts say baby boomers are unprepared for retirement due to the double burden of taking care of their parents and children.

Han Gyoung-hae, a professor of family studies at Seoul National University, said, "Baby boomers have had no extra energy to prepare for their own retirement because they've thought of retirement vaguely as a future event and they still have to spend money for their families. In these circumstances, they now face retirement earlier than they expected due to changes in the labor market."

Source: The Chosun Ilbo