🚨 Elderly Poverty Rate

Today Korean Social News for Beginners | 2025.09.27

0️⃣ Korea's Highest OECD Level Elderly Poverty and Solutions

📌 Korea's Elderly Poverty Rate Worst in OECD…20-Year Financial Deficit After Retirement

💬 According to Korea's National Transfer Accounts statistics, income peaks at age 45 and then turns into deficit from age 61. Considering the life expectancy of 83 years, people must live in financial deficit for over 20 years in old age. However, public pensions and social safety nets are not strong enough, so Korea's elderly poverty rate is about 40%, the highest level among OECD countries. With rising medical costs, the financial burden on elderly people is getting worse, making urgent improvements to the social safety net necessary.

💡 Summary

• Elderly poverty rate is the percentage of people aged 65+ earning less than half of median household income.
• Korea has about 40%, which is 3 times higher than the OECD average (13%) and the worst level.
• After income peaks at 45, deficit starts at 61 and continues for over 20 years of financial hardship.

1️⃣ Definition

Elderly poverty rate means the percentage of people aged 65 and older who earn less than half of the median household income. This means the percentage of elderly people living on less than 50% of the middle income when all household incomes in society are listed in order.

This is not simple absolute poverty but relative poverty. It shows how many elderly people are in difficult situations compared to the average living standards of that society. Korea has about 40%, which is the highest level among OECD member countries, making it a serious social problem.

💡 Why is this important?

• It's a key indicator directly related to the quality of life for elderly people in an aging society.
• It's an important standard for measuring the effectiveness of social safety nets.
• It has a big impact on conflicts between generations and social unity.
• It serves as the basis for government welfare policy and budget allocation.

2️⃣ Structural Problems of Elderly Poverty in Korea

📕 Life Income Structure and Deficit Transition

• Income drops sharply after peaking at age 45. The main situation is:

  • According to National Transfer Accounts analysis, Korean income peaks at age 45.
  • After that, it gradually decreases and turns into a real deficit structure from age 61.
  • Considering life expectancy of 83, people must stay in deficit for about 22 years.
  • This shows earlier deficit transition and longer period compared to other OECD countries.

• Income loss after retirement is at a serious level. The main problems are:

  • Most workers face early retirement or mandatory retirement between ages 55-60.
  • Re-employment rates after retirement are low, and even if they find jobs, wages drop significantly.
  • For self-employed people, retirement preparation is often not enough after closing businesses.
  • For women, pension benefits are even smaller due to career breaks.

📕 Limitations of Public Pension System

• National pension benefits are far short of living costs. The main reality is:

  • As of 2024, the average national pension benefit is around 600,000 won per month.
  • This is far less than the minimum living costs for elderly households of 1.5-2 million won per month.
  • Those with short participation periods or low incomes receive even smaller pensions.
  • Self-employed workers and irregular workers especially receive much lower benefits.

• Basic pension supplementary effects are also limited. The main limitations are:

  • Current basic pension is paid at a maximum of 330,000 won per month.
  • Even combined with national pension, it's less than 1 million won monthly, insufficient for minimum living costs.
  • Only given to the bottom 70% income group, so middle-class elderly don't receive support.
  • Real purchasing power keeps declining as it doesn't properly reflect inflation rates.

📕 Rising Medical Costs and Living Cost Pressure

• Medical costs for elderly people are rising rapidly. The main situation is:

  • Medical expenses for people 65+ exceed 50 trillion won annually, accounting for over 40% of total medical costs.
  • For those 75+, average annual medical costs per person exceed 5 million won.
  • Treatment costs for serious diseases like cancer, dementia, and cardiovascular diseases are especially high.
  • Out-of-pocket costs keep increasing due to non-covered items outside health insurance.

• Living cost inflation is hitting elderly people directly. The main burdens are:

  • Inflation rates for essential expenses like food, housing, and medical costs are high.
  • Fixed pension income makes it difficult to keep up with price increases.
  • Rising energy costs make winter heating expenses a particularly big problem.
  • Digital gaps make it difficult to use discount benefits or online shopping for savings.

💡 Main Problems of Elderly Poverty in Korea

1. Early deficit transition: Economic deficit structure continues for over 20 years from age 61
2. Low pension benefits: National pension and basic pension combined still insufficient for minimum living costs
3. Rapid medical cost increase: Elderly medical cost burden puts great pressure on household economy
4. Employment disconnection: Lack of re-employment opportunities after retirement and sharp wage drops
5. Insufficient safety net: Public social security spending ratio lower compared to OECD

3️⃣ International Cases and Improvement Plans

✅ Elderly Poverty Measures in Major OECD Countries

• Germany and France's comprehensive pension systems are getting attention. Main features are:

  • Germany built a good 3-tier pension system: public pension, corporate pension, and personal pension.
  • France guarantees retirement income with high pension income replacement rates (about 60-70%).
  • Both countries have elderly poverty rates around 10%, much lower than Korea.
  • They operate incentives for long-term participation and minimum pension guarantee systems.

• Nordic countries' universal welfare models are also worth considering. Main contents are:

  • Denmark and Sweden have sufficient basic pensions, so elderly poverty rates are under 5%.
  • They provide adequate public pensions and medical security through high taxes.
  • They support income activities even in old age through elderly job creation and lifelong education.
  • They greatly reduced elderly medical cost burdens, easing economic pressure.

✅ Step-by-Step Improvement Plans and Policy Tasks

• Comprehensive pension system reform is needed. Main directions are:

  • Gradual increase of national pension income replacement rate from current 40% to over 50% is being considered.
  • Expanding basic pension from current 330,000 won to 500,000 won level is being discussed.
  • Expanding mandatory retirement pensions and strengthening personal pension tax benefits to activate private pensions.
  • Securing financial sustainability through adjusting pension start age and premium rates is necessary.

• Expanding elderly jobs and social participation is important. Main policies are:

  • Extending work periods through retirement age extension and gradual retirement systems.
  • Expanding elderly-friendly job creation and retraining programs.
  • Improving quality and pay levels of public elderly job projects.
  • Increasing participation in social economy sectors that can utilize experience and expertise.
  • Developing new job models through elderly startup support and social enterprise development.

4️⃣ Related Terms Explanation

🔎 Relative Poverty

• Relative poverty is a poverty concept compared to the average living standards of that society.
  • Relative poverty means a state that is significantly lower than the average living standards of that society, unlike absolute poverty. OECD generally sets less than 50% of median household income as the relative poverty line.
  • Characteristics of relative poverty include: First, it's connected to the overall income distribution of society, reflecting the degree of inequality. Second, unlike absolute poverty, relatively excluded classes can exist even as society develops. Third, it extends beyond simple survival issues to social participation and quality of life problems.
  • In Korea's case, with 2024 median household income for 4-person families around 5.4 million won monthly, the relative poverty line for single elderly households is around 1.35 million won monthly. By this standard, 40% of elderly people live on income below this, showing OECD's highest poverty rate.

🔎 National Transfer Accounts

• National Transfer Accounts is a statistical system analyzing economic activities and consumption patterns by age.
  • National Transfer Accounts tracks income generation and consumption spending by age to understand the scale and direction of resource transfers between generations. It uses standardized methodology jointly developed by the UN and national statistical offices.
  • Main components include: First, total income including labor income and capital income by age. Second, total consumption combining private and public consumption by age. Third, lifetime surplus (deficit) subtracting consumption from income. Fourth, methods of covering deficits through intergenerational transfers.
  • Korea's National Transfer Accounts analysis shows income peaks at 45 and turns to deficit from 61. This shows characteristics of earlier deficit transition and longer deficit duration compared to other OECD countries, well explaining the structural causes of elderly poverty problems.

🔎 Income Replacement Rate

• Income replacement rate is an indicator showing the ratio of pension benefits to pre-retirement income.
  • Income replacement rate means the ratio of pension amounts received compared to average income during working years. For example, if someone earning 3 million won monthly receives 1.5 million won in pension, the income replacement rate is 50%. This is a key indicator for evaluating pension system adequacy.
  • Korea's national pension income replacement rate is currently around 40%. This is lower than the OECD average of 50-60%, making it difficult to maintain pre-retirement living standards with pension alone. Also, actual beneficiaries often receive lower benefits than theoretical replacement rates due to short average participation periods.
  • Experts believe over 70% income replacement rate combining public and private pensions is needed for adequate retirement life. However, Korea's total income replacement rate stays under 50% due to insufficient development of retirement and personal pensions, making this a direct cause of high elderly poverty rates.

5️⃣ Frequently Asked Questions (FAQ)

Q: Is the high elderly poverty rate simply because pensions are too small?

A: Insufficient pensions are a major cause, but more complex structural problems are intertwined.

• Elderly poverty causes involve multiple factors working together. First, the pension system's short history means current elderly generations couldn't complete sufficient participation periods. National pension started in 1988, so current elderly people often participated for only 10-20 years. Second, past high self-employment rates meant many reported low incomes or didn't properly pay premiums. Third, women have even shorter pension participation periods due to career breaks. Fourth, early retirement culture often cuts income before age 60.
• Also, rising medical cost burdens, high housing costs, and insufficient social services worsen elderly poverty. Therefore, comprehensive social safety net construction is needed along with pension improvements.

Q: How did other countries solve elderly poverty problems?

A: Each country takes different approaches, but commonly built sufficient public support and multi-tier pension systems.

• Looking at successful cases from major OECD countries shows several common points. First, Germany built a good 3-tier pension system of public pension, corporate pension, and personal pension. Public pension alone achieves over 50% income replacement rate, and widespread corporate pensions make total income replacement rate over 70%. Second, France operates public pensions with high income replacement rates (60-70%). Third, Nordic countries like Denmark and Sweden guarantee basic living for all elderly through sufficient basic pensions. Fourth, Canada operates a system combining basic pension (OAS), income pension (CPP), and low-income supplementary benefits (GIS).
• Common points among these countries are providing sufficient public support through high taxes and creating environments where elderly can continue working. Korea is also gradually improving systems by referring to these models.

Q: What should I personally do to prepare for retirement?

A: It's important not to rely only on public pensions but prepare retirement funds through various methods.

• Realistic retirement preparation methods by stage are as follows. First, maximize national pension participation periods and accurately report income to increase benefits. Each additional year of national pension participation increases pension amounts by about 20,000-30,000 won. Second, actively participate in retirement pensions (DC, DB) and use additional contributions when possible. Third, join personal pensions with tax benefits like pension savings or IRP. You can receive tax deduction benefits up to 7 million won annually. Fourth, prepare retirement funds through asset investments like real estate or stocks, but manage risks thoroughly.
• Also, it's important to reduce medical costs through health management and learn new technologies or skills to maintain work ability even in old age. In retirement, health and social relationships become important assets along with pensions.

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