KIDI: "Real Estate Asset Concentration Deepens... Retirement Fund Shortage"

KIDI '2020 Retirement Market Report' by the Korea Insurance Development Institute

[Asia Economy Reporter Oh Hyung-gil] It is pointed out that the assets of households in South Korea are excessively concentrated in real estate, which may lead to a shortage of funds for retirement. It is advised that securing income is more important than assets for a stable life after retirement.

On the 11th, the Korea Insurance Development Institute (KIDI) revealed this in the '2020 KIDI Retirement Market Report,' forecasting that South Korea's demographic structure will enter a super-aged society within five years. Currently, the population structure shows a thick jar shape with people in their 30s to 50s (43.6% of the total population), but it is predicted to gradually change into an inverted triangle with a thicker population aged 60 and over.

From 2025, it is expected that the proportion of elderly people aged 65 and over will exceed 20% of the total population, entering a super-aged society.

Furthermore, the report pointed out concerns about a shortage of retirement living funds due to the asset structure concentrated in real estate.

The 40s and 50s generation holds 53.3% of the total household assets and bears 60.2% of the debts in South Korea. Their asset holdings are skewed toward tangible assets (73.5%) rather than financial assets (26.5%). In particular, more than 90% of these tangible assets consist of real estate, raising concerns about liquidity constraints in preparing funds for retirement life.

Although most of the 40s and 50s generation responded that retirement preparation is necessary (94.9%), only 31.3% said they have sufficient retirement preparation.

As of 2019, the income replacement rate for National Pension (old-age pension) recipients is estimated at 21.3%, indicating that public pensions alone are insufficient for retirement preparation. While the utilization rate of public pensions (51.0%) as a retirement preparation method among the 40s and 50s generation was relatively high, the use of private pensions such as annuity insurance (7.2%) was low in comparison.

The report argued that strengthening tax benefits is necessary to activate private pensions. The market size of pension savings (tax-qualified) sold through the insurance industry has been continuously decreasing since the tax benefit changed from income deduction to tax credit in 2014. Retirees hope for an increase in the current tax credit rate (13.2%) and the tax credit limit amount (4 million KRW) for pension savings insurance, the report suggested.

The report was prepared based on a survey of non-retired people in their 30s to 50s living in the metropolitan area and major cities, as well as statistics from Statistics Korea, the National Pension Research Institute, the Ministry of Health and Welfare, and the Organisation for Economic Co-operation and Development (OECD).

This content was produced with the assistance of AI translation services.