Investment preferences for individual savings-type Treasury bonds held through retirement accounts diverge sharply by age, according to brokerage data. Investors in their 50s and 60s and older, who are closer to retirement, concentrated on 10-year bonds with shorter maturities, while those in their 40s and younger, with more time before they need the money, favored 20-year bonds.
The Seoul Economic Daily analyzed combined subscription data for September from two major brokerages covering individual savings-type Treasury bonds bought through defined contribution and individual retirement pension accounts. The data showed 2,566 people subscribed to 10-year bonds, with 35.62 billion won (about $24.9 million) allotted, and 808 people subscribed to 20-year bonds, with 9.75 billion won allotted. Unlike dedicated accounts for these bonds, retirement accounts can hold only the 10-year and 20-year maturities. The most striking finding was how clearly the age of investors split along the maturity of the bonds.
For the 10-year bonds, investors in their 50s dominated both in numbers and in allotted amounts. Of the total 35.62 billion won allotted, 59.04%, or 21.03 billion won, went to people in their 50s, the largest share. Those aged 60 and over followed at 20.71%, or 7.38 billion won. Together, investors aged 50 and over took 79.73% of the total allotment. By subscriber count, people in their 50s numbered 1,365 and those aged 60 and over 346, accounting for 66.08% of the total. Investors in their 20s and 30s, by contrast, numbered just 25 and 147 respectively, with allotments of 30.2 million won and 519.8 million won — the lowest of any age group on both measures.
The 20-year bonds drew a clear preference from investors in their 40s. Of the 808 total subscribers, 324, or 40.10%, were in their 40s. By allotted amount, out of 9.75 billion won, people in their 50s took 4.55 billion won, or 46.65%, and those in their 40s took 3.05 billion won, or 31.28% — both substantial shares. Investors in their 20s and 30s also showed relatively greater interest in the 20-year bonds than in the 10-year. Their combined share of allotted amounts came to 6.01%, higher than the 1.54% they held in the 10-year bonds. By subscriber count, people in their 20s numbered 25 for the 10-year maturity but 37 for the 20-year, a difference of 12.
Securities industry analysts attributed the pattern — younger investors choosing longer maturities — to the time remaining until retirement and to plans for managing retirement funds. Investors aged 50 and over, with retirement relatively near, chose the 10-year bonds in line with when they expect to draw on the money for living expenses. Those in their 40s and younger appear to have opted for a strategy of holding to maturity to capture compounding returns, even if that means locking up funds for a long period. Individual savings-type Treasury bonds held in retirement accounts receive tax deferral during the investment period, and pension income tax applies when the money is later received as a pension, depending on the relevant requirements.
An official at a major brokerage said middle-aged and older investors nearing retirement drive demand for these bonds in retirement accounts, but that demand for longer maturities was concentrated among relatively younger investors. The official added that interest in long-term investment products with tax benefits is likely to grow as stock market volatility increases.