2024-03-24 02:53:00
“I have a late child, so I want to work for a long time if my health allows. “I do strength training every day without overdoing it.” “If there is a social agreement on extending the retirement age, I would like to postpone retirement as much as possible.”
Recently, a heated debate took place in a community of prospective retirees over ‘how long will they work?’ It all started with the National Statistical Office’s announcement that the employment rate for those over 70 (the proportion of employed people among the population in that age group) has reached an all-time high. According to the National Statistical Office, as of last January, the number of employed people among the population aged 70 or older was 1.55 million, and the employment rate reached 24.5%. ⇒ For more detailed news, click here on Chosun.com (1 in 4 people in their 70s or older “worked”) …click the highest ever as of January).
There are several reasons behind this. The number of people in their 70s who are physically healthy and have a strong desire to work is increasing. The number of elderly people who want to earn their own living expenses without relying on their children is also increasing. Life expectancy has increased due to advancements in medical technology, but some say people are heading to work because they are not adequately prepared for pensions.
Illustration = Chosun Design Lab Jeong Daun
✅1 in 4 people in their 70s are employed
The working life of those in their 70s is news that even those who are regarding to retire (eunjunsaeng) are paying attention to and watching closely. As we live in an era of inflation where people continue to complain, “I feel poor because the prices of my shopping cart have risen so much,” they are worried regarding a future where they will only spend following retirement.
So, how much pension do Koreans in their 70s currently receive? Currently, there are regarding 4 million people in their 70s in Korea, half of whom are recipients of the national pension. According to the National Pension Service on the 24th, the average national pension amount for people in their 70s as of 2022 was regarding 410,000 won. By gender, men earned 500,000 won per month, while women earned less than 300,000 won. Since the national pension amount reflected the inflation rate and increased by 5.1% and 3.6% in 2023 and 2024, respectively, the amount received this year is estimated to be regarding 440,000 won per month on average.
Graphics = Chosun Design Lab Yujin Han
✅Korean insurance premium rates that have been tied up for 27 years
So, what is the situation like for people in their 70s in Japan, where many economic phenomena appear before Korea? According to data from the Ministry of Health, Labor and Welfare’s Pension Bureau on the 24th, the average pension (employee pension + national pension) of Japanese seniors in their 70s as of 2022 was 143,973 yen (regarding 1.28 million won) per month. There was a large gap between the pension amounts for men and women, at 163,875 yen and 104,878 yen, respectively.
Of course, it is difficult to simply compare the pension amounts of Korean and Japanese retirees. This is because there is a large difference in the insurance premium rates that serve as the basis for the pension premiums paid by subscribers. The insurance premium rate refers to the ratio of monthly income to insurance premiums.
In Korea, the insurance premium rate was 3% (based on workplace subscribers) from 1988 to 1992, when the national pension system was first introduced, 6% from 1993 to 1997, and has been maintained at 9% from 1998 until now. An office worker with a monthly income of 3 million won pays 270,000 won per month (135,000 won for subscribers and 135,000 won for companies) at the current insurance premium rate (9%). The monthly upper limit is 531,000 won (half between the subscriber and the company), and in the case of people with annual salaries in the hundreds of millions, there are many cases where the national pension is paid less than the health insurance premium.
Graphics = Chosun Design Lab Yujin Han
On the other hand, Japan gradually increased pension insurance premium rates through pension reform in 2004 led by then-Prime Minister Koizumi. The insurance premium rate, which was 13.58% before the pension reform, rose every year to 18.3% in 2017.
Takashi Sakamoto (坂本貴志), a researcher at RecruitWorks Research Institute, a Japanese private research institute, said, “Before the pension reform, retirees received their pension early and in large amounts, so they did not have to worry regarding their retirement, but now it is different,” adding, “With the pension reform, they can receive normal pension. “The age has been delayed from 60 to 65, and the pension amount is adjusted according to economic conditions, so the number of elderly people remaining in the labor market even following retirement age is increasing,” he said.
Korea’s national pension insurance premium rate (9%) has been tied to less than half of the Organization for Economic Co-operation and Development (OECD) average rate (18.3%) for 27 years. This means that in other countries, citizens are paying much higher insurance premiums to achieve the income replacement rate (Korea’s 42% in 2024, then lowered by 0.5 percentage points to 40% in 2028).
As the low birth rate and aging population intensify, the current national pension fund depletion date has been brought forward from 2057 to 2055 five years ago. It is even estimated that by 2078, 35% of the money earned will have to be paid as insurance premiums. The Private Advisory Committee under the National Assembly’s Pension Reform Special Committee proposed a reform plan to increase the national pension insurance premium rate from the current 9% to 12% or 13%. The final pension reform plan will be decided through additional discussions and a deliberation discussion meeting of 500 citizen representatives next month.
➡️If you are curious regarding financial preparations for retirement, check out ‘Chosun Ilbo Money’, the official economic YouTube channel of Chosun Ilbo. On Chosun.com hereClick and link on portals such as Naver and Daum (https://www.youtube.com/watch?v=OCnpYDO1qT8&t=188s) and try connecting.
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