For middle-aged families about to retire, ‘retirement living expenses’ is a real concern. They are worried that their bank account balance will run out when their monthly salary is cut off. In this case, it is helpful to look at actual data on how much retired seniors are currently spending on monthly living expenses.
According to data analyzed by NH Investment & Securities’ 100-year Era Research Center on the 29th from the National Statistical Office’s Household Financial Welfare Survey (2022), the average living expenses of retired families nationwide aged 60 or older were 1.7 million won per month. The cost of living graph by age group showed a stepwise decline. Monthly living expenses, which were 2.26 million won in their 60s, decreased to 1.62 million won in their 70s, and even 1.21 million won per month in their 80s.
Graphics = Chosun Design Lab Lee Min-kyung
Hwang Myeong-ha, a researcher at NH Investment & Securities’ 100-year Research Institute, said, “Many people are worried that they will not have as much income as they did when they were active-duty when they retire, but spending also decreases significantly.” He added, “There is a decrease in consumption around retirement, and active workers in their 50s and those in their 60s “Retired people’s living expenses plummet by 48% from 4.31 million won to 2.26 million won per month,” he said.
According to Commissioner Hwang Myeong-ha’s analysis, after retirement, the proportion of non-consumption expenditures, especially taxes, national pension, and loan interest, decreases. Commissioner Hwang said, “Non-consumption expenditures account for 32% of the actual expenditures of active workers in their 50s, but the proportion of non-consumption expenditures for retirees in their 60s decreases to 23% of total living expenses.” “The reason is that the burden is disappearing and the number of pension subscriptions to prepare for retirement is decreasing,” he said.
✅Consumption cliff that appears after retirement
Chosun Ilbo [왕개미연구소]Last July, together with NH Investment & Securities’ 100-year Research Institute, we conducted an in-depth investigation into the ‘Korea Retirement Pyramid’ and wrote an article. Looking at the retirement income pyramid (graphic below), you can see that there is a very large gap in monthly income between those who prepared a lot during active duty and those who did not, at 5.25 million won and 1.01 million won, respectively.
Graphics = Chosun Design Lab Lee Dong-woon
▶️If you want to learn more about Korea’s retirement income pyramid, click here at Chosun.com (If you earn 1.98 million won per month after retirement, you are middle class… What about the retired aristocracy?)~. You can see an in-depth analysis of the income gap among Korea’s retired generation.
The income gap between retirees also causes their retirement consumption patterns to become polarized. The average monthly expenditure of retired aristocrats who thought they had enough money to live on was 4.49 million won. Although they spend as much as active families in their 40s and 50s, their income (5.25 million won per month) is much higher than their expenses, so the household’s cash flow is in surplus.
However, even among the retired aristocrats who have a lot of money in their wallets, their consumption decreased in a gradual manner as they got older. Monthly consumption, which reached 5.63 million won in their 60s, decreased to 3.7 million won per month in their 70s and 3.41 million won in their 80s. Mr. Lee, a retiree in his 80s who lives in Seocho-gu, Seoul, said, “I don’t have good leg strength, so it’s hard to travel abroad and I don’t want to go to expensive restaurants. Just eating simple rice, soup, and vegetables at home is enough,” and “I don’t have anything I want or need to have.” “I have nothing to spend money on,” he said.
Graphics = Chosun Design Lab Lee Min-kyung
✅Retired nobles 4.49 million won vs. poor 1 million won
When making money, anyone can spend carelessly without knowing that it is scary to open their wallet. However, when you retire, the perceived spending becomes relatively much greater due to the burden of having to spend the money you have saved without any money coming in.
What is the economic life of the absolute poor, who are in the bottom 20% of income, like after retirement? The average monthly income of this class is 1.01 million won, and its financial resources come from government-supported public benefits (basic pension or basic living security benefits) and children’s allowance.
As a result of the analysis, their average monthly living expenses were 1 million won, which was one-fifth of the average expenses of the retired aristocrat class. Since there are no assets, non-consumption expenditures such as taxes and interest are very minimal, and food and housing costs account for half of total consumption. The saying, ‘You have to live according to what you have and what you don’t have’ comes to mind.
However, like the retired aristocrats, the absolute poor also spent less money as they got older. A person who spent an average of 1.26 million won per month in their 60s spent only 890,000 won in their 70s and 820,000 won in their 80s.
Graphics = Chosun Design Lab Lee Min-kyung
✅If your health collapses, life becomes a hardship.
Retirement living expenses tend to decrease with age, and are reduced by more than 50% on average compared to before retirement. However, when planning retirement living expenses, one variable remains. It’s medical expenses. When your health collapses, you begin to suffer for the rest of your life. In particular, if mobility becomes difficult and you need help from someone else (caregiver), a red light comes on for your family’s finances.
Mr. Lee, a housewife in her 50s, said, “If you listen to the stories of acquaintances who have experienced nursing their parents’ illness, they say that the nursing expenses are more than the medical expenses and that they spend money so much that they cannot even record how much they spent later,” and “The children’s private education expenses have a set deadline. “But it’s even more scary because no one knows how much hospital expenses will be spent in retirement.” Once service prices rise, they rarely fall, but nursing costs have risen nearly 40% over the past five years, becoming a major burden.
Illustration = Chosun Design Lab, Midjourney
Mr. Hwang, a retiree in his 60s, said, “I didn’t know this before I retired, but the mental burden increased because I had to spend money within the range I had saved, and I had to save up nursing expenses to not be a burden to my children. They say that living expenses will decrease when you retire, but be prepared for unexpected situations.” “I want to do this, so I’m discussing it with my wife and reducing our living expenses,” he said.
Hwang Myeong-ha, a member of the NH Investment & Securities 100-year Research Institute, said, “Retirement medical expenses must be structured so that risks can be covered by signing up for actual cost medical insurance when you are young.” He added, “Among the living expenses in retirement, the item that can be reduced the least is housing costs, but after retirement, “You can ease the burden by moving to a small area or to the outskirts,” he said. Commissioner Hwang continued, “It is best to respond to the problem of the burden of health insurance premiums increasing after retirement with private pensions (individual pensions, retirement pensions, etc.),” and added, “The pension amount received from private pension accounts is not subject to health insurance premiums at this time.” “He said.
2023-09-29 01:11:34
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