Negotiating the Whims of Chance : Evidence from the Sequence and Longevity Risk and Potential Remedies in South Korea

This study embarks on a pioneering exploration of the retirement landscape in South Korea, unveiling critical challenges associated with sequence and longevity risks. Through rigorous real-world data analysis, we shed light on the harsh reality of retirement readiness amongst a significant proportion of South Koreans, with more than half being inadequately prepared. For instance, in standard market conditions, retirees face 56.3\% of depletion risk for their portfolios within 25 years post-retirement, and this risk amplifies to 97.6\% under bearish market scenarios. To address this, we introduce a dynamic withdrawal strategy as a potential solution, finding empirical evidence supporting its efficacy in managing the sequence and longevity risk of retirement portfolios. Further, we explore policy reform scenarios, particularly deferring retirement age, as a means to safeguard the sustainability of retirement portfolios, demonstrating its empirical corroboration. Overall, our research significantly contributes to the ongoing discourse about robust retirement planning and serves as an invaluable guide for pension professionals, regulatory bodies, policymakers, and individual retirees in South Korea