Intergenerational Transfers and Old-Age Income Security in Korea

This study investigates intergenerational transfers in Korea, focusing on children’s financial assistance to their elderly parents. Even though it is not always sufficient, financial help from adult children has alleviated income deficiency of Korean elderly. Using the first wave of the Korean Longitudinal Study of Ageing (KLoSA), I find that altruism is the main motive of familial transfers in Korea and also find that positive expectations about public support decrease elderly parents’ net transfer receipt in the family. The family fixed-effect models using the KLoSA sibling sample show that the eldest son still undertakes the heaviest burden of supporting his elderly parents through financial help or coresidence with them. In addition, a child’s additional one year of education only leads to an additional net transfer of 90,000 won per year for the elderly parents, implying that child education can hardly be a retirement plan. Moreover, familial support mechanism has been deteriorating in Korea, and the burden of supporting the increasing number of the elderly has shifted from families to government; and within a family, it has shifted from the eldest son to the elderly parents themselves. Therefore, individuals need better planning for retirement and longevity risk. The government should put intensive efforts in reducing poverty that prevails among the elderly, promoting elderly employment, enhancing long-term saving incentives, and urgent pension reforms.