Finding a retiree's true value

Kim Kyung-rok

The author is an adviser at Optus Asset Management.

The case of a hypothetical retiree: Mr. K retired after spending 30 years researching a specialized field of technology. He possesses extensive expertise, experience and professional networks, yet his value in the labor market falls sharply the moment he leaves his job. His regular salary disappears, and even if he finds new employment, his income is likely to decline significantly.

So is Mr. K's value high or low?

The answer depends on whether one views it through the lens of accounting or finance. The two disciplines evaluate the same person using fundamentally different concepts of value.

Accounting looks backward. It measures an asset based on the original investment and the resources accumulated over time. Applied to an individual, this includes years of education and training, accumulated experience, investments in health and the social capital built through professional and personal relationships. From this perspective, a person's value reaches its peak later in life, when decades of investment have been fully accumulated. It also explains why experienced employees often occupy the most important positions before retirement.

Finance, by contrast, is almost entirely future-oriented. It largely ignores the past and values an asset according to the future income it is expected to generate, discounted over time. If a retiree no longer earns labor income, the projected cash flow approaches zero. From a purely financial perspective, that person's value also approaches zero.

The same individual is therefore evaluated in completely different ways depending on which timeline is used. Accounting says, "Your accumulated value is enormous." Finance says, "If you can no longer generate income, your value is close to zero."

Many retirees experience precisely this tension. Their knowledge, health and professional networks give them confidence, yet their market value can fall dramatically once they leave the workforce. Pride and discouragement coexist.

Neither perspective is wrong. They simply answer different questions. Accounting asks what has been accumulated. Finance asks what can still be earned. The real issue after retirement is not which approach is correct, but which one is appropriate for a particular purpose.

When it comes to financial security and asset allocation, the financial perspective is indispensable. Retirement requires stable cash flow, whether from pensions, dividends, rental income or continued employment. Without dependable income, even a lifetime of expertise cannot maintain one's standard of living. Retirees must honestly evaluate their ability to generate future income, create new sources of earnings where possible and supplement any shortfall with investment income. Past achievements alone cannot finance the future.

The accounting perspective becomes more meaningful when considering identity and purpose. Human beings are not simply machines that generate cash flow. Experience accumulated over decades and lessons learned through failure and trust, built through relationships, cannot easily be assigned a market price, yet they define who we are. When retirement is viewed as a period to contribute rather than simply to earn, those accumulated assets regain their significance. Teaching, mentoring, volunteering and assuming new family or community roles all create value that cannot be measured in monetary terms.

The two perspectives are not entirely separate. One of the most important challenges after retirement is converting accounting assets into financial assets. Expertise acquired during a career can generate consulting work, teaching opportunities, books or advisory positions. Some retirees with backgrounds in IT are now teaching others in their age group how to use AI, transforming decades of professional experience into a new income stream.

Mr. K's value therefore cannot be measured by a single standard. Relying solely on finance reduces people to assets that depreciate rapidly once they stop working. Relying only on accounting risks ignoring economic reality while becoming trapped in past accomplishments.

A more balanced framework is needed. Financial thinking should guide decisions about income, survival and security. Accounting should shape one's understanding of identity, contribution and purpose. The final task is to build creative bridges between the two by turning accumulated knowledge and experience into sustainable future income.

Retirement should not be viewed as the end of a person's value. Rather, it is the moment when value must be measured more flexibly, recognizing both what has been built over a lifetime and what can still be created in the years ahead.