Three-Year "Income Cliff" Between Retirement and Pension Benefits...70% of Vulnerable Retirees in Temporary Jobs Run Deficits

As the age at which people can begin receiving National Pension benefits has been pushed back, the "institutional income gap" between mandatory retirement and the start of pension payments has widened to as long as three years. Many middle-aged and older people reaching retirement age are returning to work to make ends meet, but most are being pushed into temporary or part-time jobs. Meanwhile, seven in 10 vulnerable households hit by a sharp drop in income have fallen into deficit, a new report shows.

Three-year gap between retirement and pension benefits...Sharp rise in people in their 60s who "must work to get by"

According to a report by the Korea Institute for Health and Social Affairs titled "Income Gaps Among Middle-Aged and Older Adults: Current Status and Policy Responses," the age at which people can begin receiving National Pension benefits has been rising by one year every five years, starting at 61 in 2013 and reaching 65 in 2033, under a 1998 pension reform.

By contrast, the upper age limit for mandatory National Pension enrollment remains 59. As a result, people born between 1961 and 1964, who are eligible to begin receiving benefits at 63, face an institutional blind spot in 2026: from age 60 to 62, they can neither enroll in the National Pension nor receive benefits for three years.

Although the state created this institutional gap, it failed to put adequate measures in place to cushion its effects, leaving individuals to shoulder the full burden of making ends meet. The labor force participation rate among people aged 60 to 64 rose from 57.0% in 2011 to 66.7% in 2025, while the share of wage workers climbed sharply from 49.4% to 66.2%. These figures reflect the reality that people must keep working to get by until their pensions begin.

More than 60% of new jobs are temporary or daily work...70% of vulnerable households hit by income declines run deficits

More older people are working, but the quality of their jobs has declined. The employment rate during the gap period for those born between 1961 and 1964 was 66.5%, down 7.3 percentage points from 73.8% before mandatory retirement. This was largely due to their leaving stable, regular jobs.

Among people who returned to work after finding a new job at age 60 or older, 61.3% were in temporary or daily jobs, while just 22.1% had regular jobs. This points to a substantial decline in job security compared with the 59.0% share of regular workers among those who stayed with their existing employers. Most of the new jobs were contract or part-time positions, and reduced working hours kept workers trapped in low-wage jobs.

Household finances also took a direct hit. During the gap period, wages and business income accounted for 83.0% of household income, indicating an overwhelming reliance on work. However, when the primary earner lost their main job, spouses rarely increased their working hours to make up for the resulting loss of income.

During the gap period, 15.6% to 17.2% of households saw their income plunge to less than half the median income they had received before mandatory retirement. These households managed by cutting discretionary spending, including dining out, leisure activities and clothing, to about one-third of the level of other households. Even so, seven in 10 of these vulnerable households (70.2% to 72.5%) were unable to avoid running a household deficit.

No pension to claim early, no home to sell..."Extending the retirement age and creating bridge jobs are vital"

Financial and pension programs, previously considered potential alternatives, were also of little use to low-income vulnerable groups. More than 70% of the assets held by middle-aged and older households were tied up in real estate, such as homes, leaving them short of cash for immediate living expenses. Nor was there any clear trend of people selling their homes around age 60 to cover those expenses.

Public pension programs also worked in favor of people who had held stable jobs for a long time. Among those eligible for early old-age pensions, which can be claimed during the gap period in exchange for reduced benefits, more than 77% had at least 20 years of contributions. The option had effectively become a choice for people with substantial contribution histories. In fact, households whose income remained stable received an average of 1.918 million won a month in pension benefits during the gap period, while vulnerable households whose income fell by at least half received only 527,000 won a month. As of 2023, the coverage rate for retirement pensions among people aged 60 to 64 was also just 1.4%, making them a distant prospect for most ordinary people.

In in-depth interviews, retirees also confessed that "it was only when we saw our bank balances shrinking that we realized our income had stopped." Men repeatedly failed to get rehired due to age restrictions and mismatched experience, while women, facing physical limitations, had few options beyond cutting spending. The rising costs of caring for elderly parents, hospital bills and food have left little room for further cuts, even in discretionary expenses, and people are also becoming socially isolated.

The researchers said urgent, tailored measures are needed for vulnerable groups who have been left without the resources and opportunities to cope with the higher pension eligibility age. They recommended gradually extending the mandatory retirement age in line with the pension eligibility age, introducing reemployment programs at small and medium-sized businesses, and extending the upper age limit for National Pension enrollment, starting with workers aged 60 and older who have income. They also stressed the need to swiftly build a comprehensive social safety net, including a partial pension system that allows people to claim only the amount they need, relaxed eligibility requirements for unemployment benefits, and expanded public-sector bridge jobs.

This content was produced with the assistance of AI translation services.