Retirement without retiring: Why older Koreans keep working but spend less

A 70-year-old woman surnamed Kim who lives in Goyang, Gyeonggi, owns an apartment worth more than 700 million won ($523,000) with her husband. The couple lives on about 2 million won a month from their national pensions, allowances from their children and other sources, which barely covers their living expenses.

Kim's well over her retirement age. To make ends meet, Kim works three to four days a week, mostly cleaning. Most of the couple's wealth is tied up in their home, leaving Kim to spend much of her earnings on daily necessities while setting aside some money for emergencies.

“Our home is practically all we have, and I feel we should pass it on to our children someday,” Kim said. “That makes me reluctant to sell it or take out a reverse mortgage to cover our living expenses.”

More older Koreans like Kim are working past retirement age while saving at high rates.

The employment rate among people aged 65 and older reached 41.5 percent in July, up 8.9 percentage points from 32.6 percent in July 2015, according to a Bank of Korea (BOK) report released on Oct. 7.

The annual employment rate for the age group stood at 39.5 percent last year, 2.8 times the Organisation for Economic Cooperation and Development (OECD) average of 14.1 percent.

But working longer does not necessarily mean spending more.

The average propensity to save, or the share of disposable income households set aside, stood at 32.2 percent last year for households headed by people aged 65 and older, higher than the overall average of 30.9 percent. It also exceeded the rates for households headed by people in their 40s, at 27.5 percent, and those in their 50s, at 31.3 percent.

The trend runs counter to the traditional life-cycle hypothesis, which holds that people accumulate wealth during their working years and draw down their savings to finance consumption after retirement.

In the United States, by contrast, the share of income spent on consumption clearly rises with age.

Households headed by people aged 55 to 64 had an average pretax income of $121,571 and annual consumer spending of $84,946 in 2024, equivalent to 69.9 percent of their income, according to the U.S. Bureau of Labor Statistics' Consumer Expenditure Survey. That share rose to 86.6 percent among households headed by people aged 65 to 74 and reached 99.7 percent among those aged 75 and older.

Korea presents a different picture.

Rather than drawing down their assets, many older Koreans keep working longer, a pattern described as “retirement without retirement.”

In a survey of people aged 55 to 79 with work experience, respondents had left their longest-held jobs at 53 on average but wanted to keep working until 73.6.

The OECD's Pensions at a Glance 2025 report also showed that Korea's employment rate among people aged 65 to 69 stood at 57 percent, more than double the OECD average of 26 percent.

The country's asset composition and pension system help explain why older Koreans struggle to increase consumption despite working longer.

Households headed by people aged 65 and older held average assets of 542.7 million won, but 79.9 percent of that was real estate and just 16.9 percent was financial assets.

Korea's net pension replacement rate, which measures pension income after retirement relative to earnings before retirement, stood at 38.9 percent for an average earner, far below the OECD average of 63.2 percent.

“For consumption to increase through the withdrawal of savings, as assumed by the life-cycle hypothesis, older households would need to sell their real estate assets or convert them into liquid funds,” Kim Min, a manager at the BOK's International Department, said in a report. “This makes it structurally difficult for savings to decline enough to support consumption, even as the population ages.”

“The relatively low level of National Pension benefits compared to other advanced economies, along with concerns over the depletion of the pension fund, also strengthens the precautionary motive to save,” the manager continued.

The concern is that this pattern of consumption could become even more pronounced as Korea's population ages.

The share of people aged 65 and older in Korea's population is projected to rise from 19.8 percent in 2024 to 24.6 percent in 2029, an increase of roughly 4.9 percentage points over five years.

The average propensity to consume among Korean households fell from 76.5 percent in 2010 to 2012 to 70 percent in 2022 to 2024, according to a BOK report released last year titled “The Impact of Demographic Changes on Slowing Consumption” (translated).

The report found that population aging had a particularly strong dampening effect on spending on durable goods such as cars and home appliances; semi-durable goods such as clothing; and services such as dining out and cultural activities.

Population decline and aging reduced private consumption growth by an annual average of about 0.8 percentage points between 2013 and 2024. That impact is projected to widen to 1 percentage point annually between 2025 and 2030. 

“The consumption problem among older people is a structural issue in which the labor market, wage system, real estate and pensions are all intricately intertwined,” said Yang Jun-sok, a professor of economics at the Catholic University of Korea.

“Raising the statutory retirement age requires changes to the wage system, while allowing older people to use wealth tied up in real estate for living expenses requires broader access to ways of converting housing into cash, such as reverse mortgages,” Prof. Yang said. “The solutions are relatively clear, but implementing them is extremely difficult politically.”

BY KIM WON [[email protected]]