Debt-stricken senior citizens
The debt level of Korea’s senior citizens is the world’s highest among major countries. According to the Korea Development Institute, the debt-to-income ratio of Koreans older than 60 hovers at 161 percent, much higher than the country’s overall average of 128 percent. The debt burden is bigger for those people over 60 as they have little or less income after retirement. Regular income from pensions and other sources makes up just 29 percent for Korea’s seniors, compared with over 70 percent for Germans and Dutch and 39 percent for Americans. They struggle to pay off debt if they do not have regular jobs or their businesses run into trouble.
The high debt level of senior citizens reflects the worsening household debt, which has exceeded 1,100 trillion won ($946.3 billion). In the United States and Europe, people borrow the most in their 30s and pay off their debt from their 40s. The older they get, the more assets they build up.
But debt increases with age in Korea. The age group with the largest debt in 2004 was people in their 40s. In 2014, it was those in their 50s. Those in the baby boomer generation spent all their savings and went into debt to buy a home, educate their children and marry them off. They had little left to pay off the debt they had acquired. When the baby boomers begin to retire over the next 10 years, seniors’ debt level could peak. The cycle will go on because people in their 20s and 30s cannot get a job or marry in a timely manner.
A society with people struggling under debt in their golden years cannot be happy. The social cost is enormous, as the financial sector and government will end up paying for the insolvency. The authorities and financial sector must come up with ways to prevent the vicious cycle of household debt. More loans should be rearranged to be evenly repaid in installments. Pensions connected with homes must be vitalized so that people can live more comfortably in their old age. At the same time, the working-age population must be kept at certain levels by increasing the birthrate, lessening the cost of education and increasing the number of jobs for the young.
JoongAng Ilbo, Nov. 19, Page 34
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