South Korea's Pension Gap Leaves Seven in 10 Vulnerable Households Spending More Than They Earn

Smaller budgets still leave a monthly shortfall

South Korean households struggling financially between retirement and the start of pension payments are spending just 213,000 won a month on adjustable expenses such as dining out, leisure and clothing, yet more than seven in 10 still spend more than they receive. Their spending on those items is about a third of the 616,000 won recorded among households above the study's income benchmark.

The Korea Institute for Health and Social Affairs examined this squeeze in its study, Status and Response Measures for the Income Gap Among Middle-Aged and Older Adults. Across the birth groups studied, 70.2% to 72.5% of vulnerable households ran a deficit. For the groups combined, the rate was 72.5%, compared with 23.4% among households above the benchmark, roughly three times as high.

The findings bring together three pressures on retirement finances: people often leave their main jobs before 60, replacement work generally pays less, and regular National Pension payments begin later. For people born between 1961 and 1964, pension eligibility starts at 63. Someone retiring at 60 therefore faces three years to bridge.

Researchers Chung Hae-sik, Ryu Jae-rin, Lee Da-mi and Han Kyu-re propose changes covering employment, pension contributions and income assistance. Their analysis points to a practical problem for families: reducing restaurant visits or clothing purchases can save money, but food, medical treatment and care for elderly parents continue to require cash.

Who falls into the vulnerable group?

The study assessed households headed by people born between 1957 and 1964. Researchers used the median income of each birth group at ages 55 to 59 as their comparison point. The median is the middle value when incomes are arranged from lowest to highest.

Households were classified as vulnerable when their income during the pension gap, adjusted for household size, was below half that earlier benchmark. Depending on the birth group, 15.6% to 17.2% fell into this category, approximately one household in six.

The measure identifies people living on low incomes relative to the typical income of their birth group before retirement age. It compares households against a shared benchmark rather than tracking each family's income against its own previous salary. The spending figures are also adjusted for household size, allowing a fairer comparison between families with different numbers of members.

The combined deficit rate of 72.5% shows how concentrated the financial pressure was within this group. Even with discretionary spending of 213,000 won rather than 616,000 won, many families needed to find money beyond their current income to meet their expenses.

Why the pension wait is getting longer

South Korea's 1998 pension reform set a timetable that raises the normal pension eligibility age by one year every five years. The schedule began with an increase to 61 in 2013 and reaches 65 in 2033. The retirement age used in the study's comparison is 60.

The timetable creates a longer interval between retirement at 60 and regular pension payments for successive generations:

• 1998: Pension reform established the schedule for raising the eligibility age.
• 2013: The normal pension eligibility age rose to 61.
• People born from 1961 to 1964: Regular pension payments begin at 63, creating a gap of three years after retirement at 60.
• People born from 1965 to 1968: Payments begin at 64, extending that gap to four years.
• People born in 1969 or later: Payments begin at 65, the age reached under the schedule in 2033, leaving five years after retirement at 60.

Mandatory National Pension coverage generally runs through age 59 and ends at 60. Voluntary continued enrollment allows eligible people to keep contributing beyond that age. Workers reaching 60 therefore leave mandatory coverage before becoming eligible for the normal pension, while continued contributions depend on their circumstances and ability to pay.

The researchers recommend gradually raising the contribution age limit, starting with employed people aged 60 or older whose earnings can be readily verified. This would allow more people who continue working to build their pension contribution records.

Leaving the main job can start the squeeze earlier

The average age of departure from a person's main, longest held job is around 53, well before the retirement age of 60. For someone eligible for a pension at 63, that can leave about a decade between leaving the main job and receiving regular pension payments.

Many people take other work during those years. Their challenge is replacing the stability and earnings of a long employment relationship with whatever jobs are available. A gap in pension coverage can therefore overlap with a much longer period of reduced or uncertain wages.

Among people born between 1961 and 1964, the employment rate during the pension gap was 66.5%, compared with 73.8% when the same birth group was aged 55 to 59. The decline was 7.3 percentage points and was largely associated with departure from stable employment.

Households remained heavily dependent on working, however. Wages and income from running a business accounted for 83.0% of current household income during the gap for households headed by someone in that birth group. Researchers found little measurable compensation through a spouse increasing work when the household head lost employment income.

More older people are working or looking for work

Labour market participation among people aged 60 to 64 rose from 57.0% in 2011 to 66.7% in 2025, an increase of 9.7 percentage points. This measure counts both people with jobs and people actively seeking work within that age group.

Among employed people aged 60 to 64, the proportion working for wages also increased, from 49.4% to 66.2% over the same period. By 2025, roughly two thirds of employed people in the group were wage workers.

Those changes show how central paid employment has become during the years before pension eligibility. They also explain why the conditions attached to a replacement job matter so much. A person can return to employment and still have substantially less money available each month.

The comparison within the study is especially useful: participation among older adults rose across the longer period, while employment for the 1961 to 1964 birth group fell as it moved beyond the usual retirement age. More older people entering the labour market can coexist with individual workers losing stable positions as they age.

Replacement jobs bring lower pay and less security

Among people who found new work after turning 60, 61.3% were in temporary jobs or work paid by the day. Among wage workers returning to employment, only 22.1% held regular positions, compared with 59.0% of wage workers who stayed in their existing jobs.

The gap in regular employment was 36.9 percentage points. Keeping an existing position was associated with a much greater likelihood of retaining regular employment than leaving and finding another job.

Median monthly wages also differed. In values adjusted to 2025, wage workers entering new jobs earned 2.2 million won, compared with 2.66 million won for those who stayed in their jobs. The difference was 460,000 won a month, or about 17% of the wage received by those who remained.

The median represents the worker in the middle of each earnings group. For a household relying mainly on wages, a difference of that size can leave less room for medical bills, housing expenses or saving for the remaining years before pension payments begin. Temporary contracts and shorter working hours can make that budget harder to predict.

Early pensions provide an uneven cushion

The Early Old-Age Pension allows eligible people to receive a reduced pension before the normal starting age. The study found that more than 77% of those eligible for this option had contribution histories of at least 20 years, showing the importance of a long record of pension membership.

Among households receiving public pension payments during the gap, the vulnerable group received an average of 527,000 won a month. Households above the income benchmark received 1.918 million won. The difference was 1.391 million won, with the higher figure about 3.6 times the lower one.

Families entering retirement with weaker earnings and smaller pension entitlements therefore had less support available from either source. Starting a pension early could supply some immediate cash, but a small payment still left essential expenses to cover.

Occupational retirement pensions had limited reach in this age range. In 2023, only 1.4% of people aged 60 to 64 were receiving such payments. Researchers propose a partial pension arrangement that would allow people to draw a portion of their pension when needed as another way to bridge the waiting period.

A home cannot directly pay the monthly bills

More than 70% of the assets held by households in middle and older age were concentrated in real estate, including housing. These families could own valuable property while having relatively little cash available for daily expenses.

The researchers found no pronounced statistical pattern of people selling their homes around age 60 to pay for living costs. Housing therefore remained part of household wealth without regularly becoming a source of spending money at the point of retirement.

Interviews with retirees described the practical strain behind the figures. Participants recalled becoming fully aware of the loss of income as their bank balances declined. Men described age limits and mismatches between their previous experience and available jobs. Some women described physical limitations that left them relying on spending cuts.

Medical bills, care for elderly parents and food costs restricted how far those cuts could go. Some participants also described shrinking social contact. Together with the low discretionary spending figures, these experiences show how the effort to balance a budget can affect both basic living conditions and everyday relationships.

Researchers propose employment and income support together

The institute's researchers recommend gradually extending retirement ages in line with pension eligibility. They also propose rehiring arrangements at small and medium sized businesses and longer employment opportunities for people in less secure jobs.

These measures address different parts of the same problem. Remaining employed can preserve wages during the waiting period, while extending pension coverage can allow additional contributions. Rehiring arrangements would provide another route for workers whose existing employment ends.

For people unable to find suitable work, the recommendations include temporarily easing eligibility for basic livelihood assistance and unemployment benefits. Expanded public employment would provide income during the interval before pension payments begin. Partial pensions would create another possible source of cash.

These are research recommendations; no implementation timetable was given. Their common aim is to connect the years of employment, pension contributions and benefit payments more closely, while providing separate support for people whose health, skills or job opportunities prevent them from working longer.

The household figures explain why the researchers propose several measures rather than relying on spending cuts alone. Vulnerable households were already spending far less on adjustable items, replacement workers earned less than those who stayed employed, and pension payments were smallest among the families facing the greatest financial pressure.

Key Points

• Across the birth groups studied, 70.2% to 72.5% of vulnerable households spent more than their income during the pension gap.
• Vulnerability was measured against half the birth group's median income at ages 55 to 59, adjusted for household size.
• Retirement at 60 leaves three years before normal pension eligibility for people born from 1961 to 1964, rising to five years for those born in 1969 or later.
• Among people finding new work after 60, 61.3% held temporary jobs or work paid by the day.
• Median monthly wages were 2.2 million won for workers entering new jobs and 2.66 million won for those staying in existing jobs.
• Researchers recommend longer employment, expanded pension coverage, partial pensions and income assistance for people unable to work.