Aren’t there just too many frustrating news stories these days? Especially for ordinary office workers and self-employed individuals like us, worrying about retirement is a very real concern. But did you hear the news that the number of early national pension withdrawal recipients has exceeded 1 million? Is this for real? It’s a truly disheartening situation, making you wonder why everyone is rushing to do this, even though they know their retirement funds will decrease. I feel for those who might be upset by this, so I decided to dig into it properly.
Honestly, everyone knows that the later you receive your pension, the more you get, right? So, the fact that early withdrawals have surged like this must mean that it’s incredibly difficult to get by right now. It’s frustrating to feel like we’re being unfairly targeted, but the reality of it is even more infuriating.
Why are people choosing early National Pension withdrawal, even if it means ‘losing money’?
There’s a reason why the number of early withdrawal recipients has increased to such an insane degree. The biggest reason is the ‘income cliff’ problem. The retirement age is getting earlier, but the age to receive the National Pension keeps getting pushed back. For example, people born in 1961 originally expected to receive it from age 62, but in 2023, it was suddenly delayed by another year to age 63. This creates a period of several years with absolutely no income between retirement and receiving the pension, right? This is called the ‘income crevasse,’ and people don’t have the money to get through this gap. With no immediate living expenses, they are forced to apply for early withdrawal, even if it means receiving less. It’s a truly heartbreaking situation.
The burden of health insurance premiums also plays a role. Do you know that from September 2022, the income standard for recognizing health insurance dependents was drastically reduced from 34 million won per year to 20 million won per year? If your monthly pension amount exceeds a certain level, you lose your dependent status under your children and are converted to a regional subscriber, meaning you have to pay health insurance premiums directly. So, many people are now choosing to receive a little less pension to maintain their dependent status. This news completely blew my mind.
Early National Pension Withdrawal: It Can’t Be All Advantages, Can It?
Honestly, getting immediate cash is certainly an advantage of early withdrawal. It can feel like a ray of light when you’re truly desperate after your income stops in retirement. But that’s not the end of it. The biggest disadvantage of early National Pension withdrawal is the ‘lifetime reduction.’ For every year you receive it early, your pension amount decreases by 6% annually, and if you receive it up to 5 years early, you only get 70% of the original amount. For example, if you were originally supposed to receive 1 million won per month but receive it 5 years earlier, you’ll only receive 700,000 won per month for life. Considering inflation, the perceived reduction will be even greater.
While it might provide short-term relief, in the long run, your retirement income stability will be completely shattered. In an era where life expectancy is increasing, this can be even more devastating. The structure is such that the later you receive it, the greater the total amount you receive, so giving that up is a decision that requires extreme caution. When you see things like this, it feels hopeless, but isn’t the reality of struggling to make ends meet right now even sadder?
The Income Cliff: How to Survive It? Realistic Retirement Preparation Tips
So, how do we overcome this income cliff? Honestly, there’s no single answer, but I’ve looked into a few methods for a better life.
- Utilize deferred pension: If you have some immediate income and are healthy, delaying the start of your pension with ‘deferred pension’ is a good option. Since the pension amount increases by 7.2% for every year you delay, it can be much more advantageous later on.
- Create a second ‘salary’ account: It’s necessary to actively utilize retirement pensions and private pensions to create a steady cash flow even after retirement. Investing in dividend stocks or rental income can also be considered.
- Optimize health insurance premiums: When considering early withdrawal, you must also consider whether to maintain your health insurance dependent status. It’s important to carefully calculate your pension income and other income to prevent the unfortunate situation of being converted to a regional subscriber.
- Re-employment or multiple jobs: Continuing income-generating activities after retirement might be the most realistic answer. Efforts to fill the income gap through re-employment or multiple jobs in areas of interest are necessary.
These might seem like common knowledge, but they are truly facts. Isn’t it those who prepare in advance who live a good life?
The Conclusion: I’ll Protect My Own Retirement!
The news of over 1 million early National Pension withdrawal recipients is a legendary event that clearly shows the unstable reality of retirement in our society. While the pension system is important, it makes us realize once again that we ultimately have to take responsibility for our own retirement. Let’s all persevere through our current lives with a ‘hold on’ mentality and fight for a good retirement! I hope everyone prepares diligently to create a retirement without regrets.