City dwellers struggle to save for retirement
City residents in their 40s have almost nothing left after paying for necessities and education and lack excess fund to bank for retirement, according to a recent study.
About three-quarters of after-tax income is used for these expenses.
The average urban dweller in their 40s earns 4.68 million won ($4,191) a month after taxes are paid, Hana Bank said in a report released on Monday, and of that 73 percent is spent on daily expenses and schooling costs.
About 13 percent goes toward education, which includes tutoring costs.
After other costs, they are left with about 1.26 million won.
Single-income families earn 4.3 million won after tax on average, whereas double-income families averaged 6.15 million won.
The study is based on a survey of 1,000 people born between 1972 and 1981 living in Seoul, Daejeon, Daegu, Busan or Gwangju.
Korea has 8.29 million people in their 40s, which is 16 percent of the total population. Of the 20 million people with salaried jobs, 4.9 million are in their 40s.
On average those in their 40s hope to retire at 59.5 years old, and they need 2.03 million won a month to survive after retirement and 3.52 million won a month to maintain their standard of living.
Of those surveyed, 48 percent said retirement income will be a pension, 36 percent said savings and 31 percent said a paycheck, with multiple answers allowed. Only 27 percent mentioned investment products.
Only 39 percent of the top income earners and 31 percent of the medium income group considered savings as their main income source, while 41 percent in the lower income cohort considered savings as their biggest source of income after retirement.
The majority said disposable income is insufficient for retirement savings.
Of those surveyed, only 39 percent believe their income will increase after 10 years, while the rest see their income at the current level or lower.
The situation is more difficult for those in the lower income groups as many said their debt has increased since Covid-19 started.
According to the survey, 15 percent said their debt shrunk since Covid-19 outbreak last year, and 38 percent said their debt has increased. Among those in the lowest 40-percent income bracket, 45 percent said their debt has increased.
“With longer life expectancy, management of economic abilities is becoming necessary,” said Kim Ji-hyun, Hana Financial Investment senior researcher.
BY LEE HO-JEONG [firstname.lastname@example.org]