According to a new report from consulting firm Milliman, retirees’ age is as strong a behaviour indicator as income levels. This puts a major question mark next to traditional benchmarks, like the use of a percentage of final salary as a retirement savings target without making allowance for changes in lifestyle.
The Retirement Expectations and Spending Profiles report found the median retired couple will see expenditure fall by 36.7 per cent as they shift from early retirement (65-69) to later retirement (85+).
It also found that retirees across all income levels experienced similar falls in expenditure, while high-income retirees actually save money. Across all income levels, spending on food, energy, goods and services, housing, travel and insurance tends to be similar; declining slightly or remaining steady. Naturally, healthcare spending shoots up.
However, there is a divergence between high- and low-income earners, with high-income households likely to have higher energy bills, however both see spending trend upwards as they grow older – possibly down to hopes to make home more comfortable than a retirement village.
“This data and the trends it reveals have important implications for super funds attempting to meet the needs of their members. It should feed into communication strategies, general and personal advice and product design,” Milliman said.
“In this way, funds can meet the actual lifestyle needs of their members.”