How Portfolios Evolve after Retirement: Evidence from Australia

27 Pages Posted: 9 Jun 2016

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

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Date Written: June 2016

Abstract

Households in many countries reach retirement with lump sums of financial wealth accumulated in defined contribution 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 2002–2006 and decumulated in 2006–2010 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 USA, the overall effect of health shocks on the wealth of retired Australian households is minimal, but financial shocks have large effects.

Suggested Citation

Spicer, Alexandra and Stavrunova, Olena and Thorp, Susan, How Portfolios Evolve after Retirement: Evidence from Australia (June 2016). Economic Record, Vol. 92, Issue 297, pp. 241-267, 2016, Available at SSRN: https://ssrn.com/abstract=2792417 or http://dx.doi.org/10.1111/1475-4932.12255

Alexandra Spicer (Contact Author)

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

The University of Sydney Business School ( email )

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

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