Falling retirement spend behaviour-driven, Milliman says
Falling expenditure in retirement is driven by behaviour rather than by declining incomes, new research from actuarial firm Milliman has shown.
The research suggested that retirees’ age is just as strong an indicator of behaviour as income levels and cast doubt on common benchmarks, such as using a percentage of final salary as a retirement savings target, which make little allowance for lifestyle changes.
Milliman said its Retirement Expectations and Spending Profiles showed the median retired couple’s expenditure fell by more than one-third (36.7 per cent) as they moved from early retirement (age 65 to 69) and into older age (85 years and beyond).
However, the firm said its new analysis included the latest census income data, which revealed that poor, middle-income and high-income retirees all showed similar declines in expenditure throughout retirement.
Milliman senior consultant, Jeff Gebler said while overall spending declined, there were still significant variations between the lowest and highest earners.
There were also important expenditure trends underway, with home ownership levels declining in Sydney and Melbourne as energy prices escalated quickly.
“While energy represents a small proportion of overall household expenditure, the amount spent is significantly correlated to income levels: higher income households have more expensive and energy-consuming lifestyles,” he said.
Gebler said the data and the trends it revealed have important implications for super funds that are attempting to meet the needs of their members.
“It should feed into communication strategies, general and personal advice and product design. In this way, funds can meet the actual lifestyle needs of their members,” he said.
Recommended for you
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
Betashares has named the top Australian suburbs with the highest spare cash flow, shining a light on where financial advisers could eye out potential clients.
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
Estimates for the calendar year 2024 put the advice industry on track for a loss in adviser numbers as exits offset gains from new entrants.
