The Korean economy faces two major problems, high household debt ratio and early retirement coupled with a low national pension fund.
When the bubble in the real estate market peaked just before the global financial crisis, the U.S. household debt to GDP ratio reached 100% and the household debt growth rate reached 10%.
Korean household debt growth rate has exceeded 10% in the past three years, the second highest in the world after Norway, which has reached 15%.
In addition, Korea has reached 90% in terms of household debt-to-GDP ratio, making it among the top 10 in the world with Switzerland, Australia, Denmark, the Netherlands, Norway, Canada and New Zealand.
The WSJ explained that the 10 countries in the danger zone are geo- graphically far apart but have something in common. The ten countries did not suffer a direct blow from the worst financial crisis, such as the Lehman Brothers crisis and the European financial crisis, therefore their housing market did not collapse significantly.
The second problem comes from the low national pension fund. At present, the legal retirement age of our South Korea is 60 years old. However, Korean workers retire from work at the average age of 49. People retire 11 years earlier than their legal retirement age. There is no problem with voluntary retirement if one earned and saved enough money but economic problems arise with involuntary retirement. After retirement, income activity stops and only expenditures continue, making it difficult to enjoy their second life. Therefore, if you want to voluntarily retire, you need to secure enough assets necessary to maintain your life after retirement.
The most representative way to prepare for enough assets is pensions. The retirement preparations using pensions look pretty gloomy though. Except for some special jobs such as public officials, most Korean workers are not adequately prepared for retirement through pension. Of the 55–79 year olds in 2018, only 45.6% are pensioners. Average monthly receipts are KRW 570,000 (about USD 470) and those receiving less than KRW 500,000 (about USD 413) a month accounting for 71.1%.
Receiving over KRW 1,000,000 (about USD 825) is only 14% of the total. It is thought that the minimum living expenses for the elderly who are in their 50s or older should be at least KRW 1,760,000 (about USD 1,450) for a couple and 1,080,000 (about USD 890) for a single. The monthly receipts of KRW 570,000 is just largely insufficient.
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