The South Korean government has recently proposed plans to potentially raise the age for mandatory pension contributions from 59 to 60 or even higher as part of its efforts to overhaul the national pension system. Currently, South Koreans pay into the pension fund until age 59 and start receiving benefits at 63. The proposed reform aims to extend the contribution period as much as possible before payouts commence. However, with the legal retirement age currently set at 60, this change could mean that people may need to continue making payments into the pension system even after retiring and no longer having a regular income.
South Korea is on the brink of becoming a “super-aged society,” with 20% of its population soon to be 65 or older. The country already faces a significant challenge, as it has the highest elderly poverty rate among OECD nations, standing at 40.4%. One effective solution to address this issue is through continued employment, ideally allowing people to stay in their current jobs after retirement, albeit at reduced wages. Raising the retirement age or rehiring retirees could help bridge the income gap before pensions kick in—a critical move as the population continues to age. By 2050, over 40% of South Koreans are expected to be 65 or older, and the growing number of people relying on national welfare and pensions could put considerable strain on the country’s finances.
Some companies in South Korea are already challenging the traditional retirement age of 60. Hyundai Motor Company, for instance, has reached a tentative agreement with its labor union to allow technical and maintenance workers to continue working for an additional two years after retirement at an entry-level salary. This arrangement allows the company to retain experienced workers at a lower cost while helping employees avoid a sharp decline in income post-retirement. Likewise, Andong Medical Group in Gyeongsangbuk-do offers employees the chance to work until age 70 through post-retirement rehiring. In other countries, Japan has aligned its retirement age and pension eligibility at 65 and introduced the “Act on Stabilization of Employment of Elderly Persons,” ensuring employment opportunities for individuals up to 70. With South Korea facing comparable industrial challenges and an aging population, this approach could be a viable option. Meanwhile, the U.S. and Europe generally steer clear of setting mandatory retirement ages, opting for laws that combat age discrimination instead.
However, raising the retirement age presents challenges akin to those of pension reform. Without changes to labor laws and wage structures, businesses may face difficulties if the retirement age is extended. Furthermore, increasing the retirement age could reduce job opportunities for younger workers, potentially leading to tensions between generations. This complexity has previously hindered significant progress on this issue. It is crucial to explore various options, such as extending the retirement age, rehiring retirees, or even eliminating the retirement age altogether, based on the needs of both companies and employees. At the same time, reforms to wage systems and increased flexibility in employment are essential. The government and National Assembly should begin discussions on raising the retirement age alongside pension reform efforts.
