Expenditure patterns in retirement

Abstract

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.