Stopping the greed

Koreans believe they need at least 2.26 million won ($1,916) a month in living expenses if they retire before the legal retirement age. But in reality, they have just half that amount - 1.1 million won - after pooling every reserve from savings and pensions, according to a poll of 2,906 male and female adults by a research arm of KB Financial Group. The survey suggests many people could fall into poverty if their monthly income is pared or lost after early retirement.

Many people are being laid off through early retirement programs due to the prolonged economic slowdown, but few of them are well prepared. Home and other real estate properties take up nearly three-quarters of Koreans’ wealth. Most are purchased on debt. Homes could pose a burden rather than security in old age. It is therefore important for each and every one of us to study finance and plan for our senior years.

Financial institutions must provide a greater selection in products that can offer security for customers who retire early. More than half of the funds offered in Japan provide monthly returns. American lenders are advanced in offering investment consulting and management plans online with a low service charge. Financial products that offer monthly payments amount to just 0.8 percent of business in Korea. Those provided by securities companies require a starting deposit from 10 million won to 100 million won.

Mirae Asset Life Insurance scrapped front-end fees despite strong protest from its sales staff. Its customers can now redeem most of their contribution even when they cancel their contracts ahead of maturity. Sales and profits of the insurance company improved sharply after the move.

Financial institutions must design and run products according to customer needs. They will be shunned by customers if they go on running business based on service fees. The government meanwhile should ease regulations so that financial institutions are more eager to develop and provide products that can give real help to customers.

JoongAng Ilbo, Dec. 12, Page 30