Retirement
The case for spending more money in retirement
Australian retirees would be better off spending more in retirement and drawing down to minimums sooner after the recent changes to taper rates, new analysis has shown.

The case for spending more money in retirement
Australian retirees would be better off spending more in retirement and drawing down to minimums sooner after the recent changes to taper rates, new analysis has shown.

According to thinktank Rice Warner, retirees that spend more money have the dual benefit of being able to spend more today and then have it offset by the pension later in life.
Currently, the value of a retiree’s pension is reduced by $78 for every $1,000 of assets above the relevant thresholds.
To illustrate its point, Rice Warner provided the example of a person earning $90,000 a year over 40 years, saying that “if the retiree draws down their capital over the 23 years to age 90, they not only gain the benefit of spending more of their savings but also become eligible for higher Age Pension payments sooner”.
Why don’t retirees draw down much more than the minimum?
The thinktank expressed a belief that Aussies are scared of running out of money in retirement, leading to people living unnecessarily modestly in their golden years.
“There have been many reasons proposed for why retirees behave this way, among them a fear of running out of money and uncertainty about how long they will live,” it was offered.
How to confidently draw down savings?
While the Age Pension is likely to provide enough certain lifetime income for low-balance members, and high-balance members won’t necessarily need to draw on as much of their capital anyway, the high proportion of Australians in the middle (with balances between around $300,000 and $800,000) will benefit greatly from more certainty around their retirement income.
In February this year, legislation passed to amend the means test rules that will apply to longevity protection products from 1 July 2019.
Under these rules, only 60 per cent of the purchase amount of a lifetime income stream will be an assessable asset and only 60 per cent of the payment will be income for the purpose of means tests.
According to Rice Warner, this change should in time promote the development of longevity protection products such as deferred lifetime annuities.
“This allows the retiree to more safely draw down the remainder of their savings up to that point, thereby enjoying a lifestyle that is better than would otherwise be the case during the early and more active years of retirement,” it concluded.
About the author

About the author


Retirement Planning
Retirement time bomb requires complex thinking
The majority of Australia’s super assets now sit in the hands of retirees and pre-retirees, but many require more nuanced investment strategies to achieve the lifestyle they want in retirement, a ne...Read more

Retirement Planning
Why some Millennials are struggling to save for retirement
Millennials are struggling to save for retirement as they face challenges that are different from other generations. What are these reasons? ...Read more

Retirement Planning
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians. ...Read more

Retirement Planning
Effective tips that can help Millennials retire faster
Millennials have changed the cultural and societal landscapes of the world. This is unsurprising, given the fact that they are the best educated and most diverse generation in history. ...Read more

Retirement Planning
What you need to know to get ahead financially
Australians looking to get ahead are being advised to analyse their financial situation, set financial goals and reduce debt whenever possible. ...Read more

Retirement Planning
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the f...Read more

Retirement Planning
Should older Australians downsize their property?
Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up i...Read more

Retirement Planning
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans. ...Read more

Retirement Planning
Retirement time bomb requires complex thinking
The majority of Australia’s super assets now sit in the hands of retirees and pre-retirees, but many require more nuanced investment strategies to achieve the lifestyle they want in retirement, a ne...Read more

Retirement Planning
Why some Millennials are struggling to save for retirement
Millennials are struggling to save for retirement as they face challenges that are different from other generations. What are these reasons? ...Read more

Retirement Planning
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians. ...Read more

Retirement Planning
Effective tips that can help Millennials retire faster
Millennials have changed the cultural and societal landscapes of the world. This is unsurprising, given the fact that they are the best educated and most diverse generation in history. ...Read more

Retirement Planning
What you need to know to get ahead financially
Australians looking to get ahead are being advised to analyse their financial situation, set financial goals and reduce debt whenever possible. ...Read more

Retirement Planning
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the f...Read more

Retirement Planning
Should older Australians downsize their property?
Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up i...Read more

Retirement Planning
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans. ...Read more