The spending of most retirees is modest and tends to be steady throughout retirement, according to a new study.
The research, released by the Australian Institute of Superannuation Trustees (AIST), found that 80% of retired households reported spending levels at or below the ASFA ‘modest’ retirement standard – 23,797 for singles or $34,226 for couples aged 65-85 in 2014 who own their own home.
AIST CEO Tom Garcia said the research challenged perceptions of how retirees spend in retirement.
“Learning more about what retirees actually spend compared to their income will help us make evidence-based decisions about adequacy and super policy,” he said.
“There are a lot of myths and fear about what retirees need to live on. This study suggests that most older households, including wealthy ones, have relatively modest expenditure and – on average – have the highest financial satisfaction.”
The research also found that spending did not appear to decline during retirement but was relatively constant. Though today’s retirees are spending more than retirees have in the past.
However low income retirees are struggling. “On the one hand we have low income households that appear to be taking on debt or selling down assets to meet their living expenses, while at the other end of the spectrum, the very wealthy households appear to have high rates of disposable income,” said Mr Garcia.
Spending in retirement is also subject to significant regional variations.
“The finding that retirement spending is largely driven by cost-of living pressures such as geographical location and household structure rather than wealth has important implications for the design of retirement income products, and for superannuation policy,” said Australian Centre of Financial Studies (ACFS) Executive Director, Professor Maddock.
The research was commissioned by AIST, conducted by the ACFS and based on the HILDA survey of 8,000 households.