Retirees’ spending falls faster than expected
Retirees’ spending has fallen faster than expected into old age, according to findings from the analysis of real-world expenditure data conducted by Milliman.
The median retired couples’ expenditure fell by more than one-third (36.7 per cent) as they moved from their peak spending years in early retirement, between 65 to 69 years of age and into older age (85 years and beyond).
At the same time, the decline in expenditure for couples in the early years of retirement was about six to eight per cent across each four-year age band and then it accelerated once retirees passed 80 years of age.
According to the Association of Superannuation Funds in Australia (ASFA), a “comfortable” couple aged 85+ years would spend about 7.8 per cent less than those aged 65-85 years of age, with food expenditure being the largest component of essential spending, while all discretionary expenditure such as travel and leisure would continue to decline even more.
The Milliman Retirement Expectations and Spending Profiles (ESP) analysis showed the top 75th percentile of retirees aged 85-plus were still spending at or below the Aged Pension.
Milliman stressed that financial plans and products should reflect these expenditure changes and the greater risks, such as market falls, and uncertainties, such as health events.
At the same time, many products which were aimed at retirees still assumed their spending would rise in line with CPI, with more than half of all of balanced pension funds ranking their performance against CPI.
AUTHOR
Oksana Patron
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
