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Income like a paycheck after retirement

Published: 05 Feb. 2026, 00:04

Kim Kyung-rok

The author is an adviser at Optus Asset Management.

Retirees often ask what they should do after moving their savings into an individual retirement pension, or IRP, if they want to receive a steady income that feels like a monthly paycheck. It sounds like a simple question, but it captures one of the core challenges of an aging society. During periods of population growth, the focus is on accumulating assets. In an aging society, the center of gravity shifts toward turning accumulated assets into income, moving from asset building to income generation.

An older man is seen sitting on the steps of a restaurant eating a meal near Tapgol Park in Jongno District, central Seoul on March 24, 2025. The relative poverty rate of Korea's retirement-age population was the highest among the 38 member countries of the OECD in 2023, according to a report by the Statistics Research Institute under the Ministry of Data and Statistics published in March, 2025. [NEWS1]

The National Pension system, under which people pay contributions while working and receive lifelong payments after retirement, is a representative model of converting accumulated assets into stable income. The problem is that outside the National Pension, few assets can reliably generate safe retirement income.

Assets that produce income include bank deposits, government and public bonds, and performance-based dividend products. Deposits, however, typically have maturities of only one year, making them ill-suited for generating long-term cash flow. With capital markets performing well recently, dividend-paying stocks, REITs and monthly covered call ETFs have gained popularity, but their asset values can fluctuate sharply.

Financial products that can provide relatively safe income over the long term include government bonds and annuities offered by insurers. Government bonds often have long maturities, with more than 70 percent issued with terms of five years or longer, and some extending up to 50 years. This makes them capable of delivering stable income over extended periods. Their biggest drawback for retirement income, however, is that their cash flow is uneven.

Consider 100 million won invested in a 10-year government bond with a 3 percent coupon. The annual interest is 3 million won ($2,000), or 1.5 million won every six months, equivalent to 250,000 won a month. The bond pays 1.5 million won every six months for a total of 20 payments. At maturity, the principal of 100 million won is repaid, meaning a lump sum of 101.5 million won arrives at once. In effect, the investor receives 1.5 million won 19 times, then a final payment exceeding 100 million won. The cash flow could hardly be less even.

As a result, generating 1 million won a month would require about 400 million won invested in such bonds, followed by a large principal repayment after 10 years. This makes government bonds an impractical retirement income asset for most people.

There are ways to smooth cash flow. Instead of buying 400 million won of 10-year bonds at once, an investor could buy 40 million won each of 10-year, nine-year, eight-year bonds and so on down to one-year bonds. This would produce principal repayments of roughly 40 million won each year, creating a more stable cash flow. Buying bonds monthly would smooth it further. In practice, however, it is difficult for individuals to manage staggered maturities, and yields differ by maturity, adding complexity.

Another option is to buy bonds with the same maturity at different times. Someone more than 10 years from retirement could purchase 10-year bonds annually or monthly so that maturities begin to roll in after retirement. This, too, is difficult to execute, particularly because managing the interest income received before retirement is not straightforward.

People walk in and out of the comprehensive counseling center at the National Pension Service’s Seoul northern regional headquarters in Seodaemun District, western Seoul on Jan. 9. [YONHAP]

One simple alternative would be for issuers to offer retirement bonds. Instead of repaying principal in a lump sum at maturity, the issuer would amortize repayment over time, for example, returning 400 million won in roughly 40 million won annual installments over 10 years. While less convenient for issuers, this structure would provide investors with stable cash flow, similar to the equal principal and interest repayment structure of standard home mortgages.

Such retirement bonds could cover both asset accumulation and withdrawal over a lifetime. Before retirement, interest could be reinvested on a compound basis to build assets. After retirement, principal and interest could be paid out in installments like a pension. For example, buying 100 million won of a 3 percent government bond at age 55 and compounding it for 10 years would grow it to about 134 million won. After retirement, that amount could be received as amortized payments. The structure combines a compound bond during the accumulation phase with an amortizing bond during the payout phase.

Issuing retail bonds tailored to individual needs can be costly in a market designed for large volumes. Still, in an era of aging and rising fiscal deficits, such bonds could broaden the demand base for government debt while providing retirees with a stable source of income. If retirement bonds were also indexed to inflation, they would further help preserve purchasing power in old age.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.