"Even with KRW 400 million, you're not middle class" ... Six criteria that define the "true middle class"

[Financial News] A recent analysis found that so-called "true middle-class" households—those with sufficient income, consumption and savings capacity, as well as assets, debt management and retirement preparations—account for only about one-quarter (24.6%) of all households. Rather than defining the middle class solely by income, the key criterion is whether a household has the financial safety net needed to maintain its current standard of living after retirement.

According to the "South Korea's True Middle Class" report published on the 26th by NH Investment & Securities' 100-Year Life Research Institute, the institute proposed six combined criteria for identifying middle-class households. Three indicators—income, consumption and savings—reflect current living standards, while the other three—assets, debt and retirement preparations—show whether those standards can be sustained in the future.
Under the institute's criteria, annual income must fall between KRW 28.08 million and KRW 74.88 million, or 75% to 200% of the median annual equivalized disposable income of KRW 37.44 million, based on OECD standards. In addition, households must maintain a middle-class level of consumption of at least KRW 15.67 million per year and have enough savings capacity to retain at least 10% of their disposable income after consumption.
For future sustainability, households must meet at least two of three requirements: net worth of KRW 238.60 million to KRW 694.32 million, annual loan principal-and-interest payments equal to no more than 30% of disposable income, and retirement preparations and the ability to cover living expenses rated "average" or higher.
Applying these criteria step by step sharply raised the threshold for being considered middle class. When only income was considered, 52.9% of all households qualified. The share fell to 43.2% after adequate consumption was added and declined further to 39.9% when the ability to save at least 10% of income was required.
Ultimately, only 24.6% of households were classified as the "true middle class" after meeting the future safety-net requirements. Just 8.0% satisfied all six criteria.
When only income was considered, 52.9% of all households qualified as middle class—roughly one in two households. But after consumption and savings capacity, followed by assets, debt and retirement preparations, were incorporated step by step, the proportion plunged to 24.6%. Only 8.0% of households fully met all six criteria.
The economic indicators of true middle-class households differed markedly from the overall average. Their median disposable income was KRW 6.31 million per month, or KRW 75.72 million annually, while monthly consumption spending stood at KRW 3.19 million, or KRW 38.22 million annually. This left them with about KRW 3.12 million in surplus funds each month.
There was also a significant difference in asset soundness. The median net worth of true middle-class households was KRW 417.05 million, about KRW 178.45 million higher than the median of KRW 238.60 million for all households. Their median financial assets, a measure of cash liquidity, stood at KRW 112.30 million—about 1.8 times the KRW 63.12 million recorded for all households. The share living in their own homes was 72.5%.
Jinwoong Kim, a research fellow at NH Investment & Securities' 100-Year Life Research Institute, said, "True middle-class households are not simply those that own one expensive home; they have built up sufficient liquid financial assets on a stable housing foundation." He added, "When considering stability throughout life, the standard for the middle class should shift from 'how much people earn' to 'how stably they live and how long they can sustain that life.'"

[email protected] Moon Young-jin Reporter