Seoul, South Korea – Early withdrawals from retirement funds surged to a four-year high in 2023, primarily driven by individuals using their savings to purchase homes, according to the latest statistics released by the Statistics Korea on Monday.

The data revealed that the retirement fund participation rate slightly dipped to 53.0% last year, with 6.74 million out of 12.72 million eligible workers enrolled in the program. While this marks a slight decrease from 2022, the overall trend had been upward until last year.

However, the number of individuals making early withdrawals from their retirement funds jumped by 28.1% to 64,000 in 2023, compared to the previous year. The total amount withdrawn also surged by 40.0% to 2.4 trillion won (approximately US$1.8 billion). This marks the first increase in both the number of withdrawals and the total amount withdrawn since 2019.

The primary reason cited for early withdrawals was the purchase of a home, accounting for 52.7% of all cases. A record-high 34,000 individuals withdrew a total of 1.5 trillion won for this purpose. Experts attribute this trend to the rising interest rates, which prompted many to utilize their retirement savings to reduce their mortgage burden and secure housing.

The second most common reason for early withdrawals was rental housing (27.5%), followed by bankruptcy proceedings (13.6%). While younger individuals (aged 20 or below) were more likely to withdraw funds for rental housing, those in older age groups primarily used their savings for home purchases.

The retirement fund participation rate varied across different-sized companies, with smaller firms (10-29 employees) having a lower participation rate of 48.2% compared to larger firms (300+ employees) with a rate of 70.2%. This disparity highlights the increased vulnerability of employees in smaller businesses to financial insecurity in their retirement years.

Despite the rising trend of early withdrawals, the total amount of retirement funds accumulated increased by 13.9% to 381 trillion won in 2023. The majority of these funds (80.4%) were invested in low-risk, principal-protected products, while a smaller portion (12.8%) was allocated to higher-risk, performance-based investments.