How Portfolios Evolve after Retirement: Evidence from Australia

43 Pages Posted: 27 Jun 2013 Last revised: 2 Nov 2015

See all articles by Alexandra Spicer

Alexandra Spicer

Reserve Bank of Australia

Olena Stavrunova

University of Technology Sydney (UTS)

Susan Thorp

The University of Sydney Business School

Multiple version iconThere are 2 versions of this paper

Date Written: November 2, 2015

Abstract

Households in many countries reach retirement with lump sums of financial wealth accumulated in defined contribution (DC) retirement plans. Retired households need to manage risks and generate income from their savings. We study the dynamics of retirement wealth and portfolio allocation using the three wealth waves of the Household, Income and Labour Dynamics in Australia panel survey. The average retired household maintained or accumulated wealth in 2002-06 and decumulated in 2006-10 consistent with trends in financial asset prices. At older ages, households prefer portfolios with less risk and more liquidity, while maintaining ownership of the family home. The probability of households exhausting financial assets increased over the sample but households who depleted financial wealth did not liquidate their housing wealth at higher rates than other households. In contrast to the U.S., the overall effect of health shocks on the wealth of retired Australian households is minimal but financial shocks have large effects.

Keywords: retirement wealth, life-cycle saving, public pension, portfolio choice

JEL Classification: D91, E21, G11

Suggested Citation

Spicer, Alexandra and Stavrunova, Olena and Thorp, Susan, How Portfolios Evolve after Retirement: Evidence from Australia (November 2, 2015). CAMA Working Paper Series Paper 39/2015, Available at SSRN: https://ssrn.com/abstract=2285848 or http://dx.doi.org/10.2139/ssrn.2285848

Alexandra Spicer

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

Olena Stavrunova

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Susan Thorp (Contact Author)

The University of Sydney Business School ( email )

Abercrombie Building
H70
The University Of Sydney, NSW 2006
Australia
0290366354 (Phone)

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