Expenditure patterns in retirement

23 Aug 2016

Providing retirement income for the healthiest, wealthiest and largest demographic to ever reach retirement in Australia is a topic of increasing interest and debate.

How should an ‘adequate’ retirement income be defined across a vast group with diverse circumstances and requirements? What is the role of the individual in providing for their own retirement, and what is the obligation of society?  The increasing cost of retirement – as represented by a longer-living population with rising health care costs and a higher expected standard of living than any previous generation – has made these questions more complex than ever before.

This paper utilises the Household Income, and Labour Dynamics in Australia (HILDA) survey to examine real expenditure patterns of Australian households aged 65 and above. These data offer unique insights, including the ability to track the same households and age cohorts over time, and link expenditure data to household wealth, income, composition and geographic location.

This research may assist superannuation trustees to better understand the needs of their members, including for the purposes of developing retirement income products. Retirement expenditure analysis may also improve understanding of the adequacy of the Australian pension system, including use of both the Age Pension and superannuation entitlements. At the individual level, understanding the likely pattern of expenditure in retirement may help improved decision-making on planning for the retirement phase.

Key findings

  • About 80 per cent of retired households in the HILDA survey report expenditure levels that are at or below the ASFA ’modest’ standard. 
  • The HILDA data show that ‘average’ spending levels can be misleading, with significant variation in standards of living within age cohorts. 
  • The highest earning households save a significant proportion of their income; for other households expenditure and income levels are similar.
  • Contrary to findings commonly cited in research, HILDA households do not show a decline in expenditure through the course of retirement.
  • Housing costs are significant for the minority of retirees who do not own their homes.
  • This is the wealthiest retired generation ever in Australian history, with household wealth and income continuing to increase with each successive HILDA survey. 
  • Further, today’s retirees are spending more than earlier cohorts at a similar age.
  • Self-funded or partly self-funded retirees appear to enjoy a significantly higher standard of living than those who rely on the Aged Pension. 
  • While there is significant income disparity within the HILDA population, the level of household expenditure varies more according to geographic location than it does by level of income
Publication Details
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Subject Areas
Geographic Coverage