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Age pensioner decumulation: Responses to incentives, uncertainty and family need

Author

Listed:
  • Anthony Asher

    (The School of Risk & Actuarial Studies, UNSW Business School, UNSW Sydney, Sydney, NSW, Australia)

  • Ramona Meyricke

    (CEPAR, UNSW Sydney, Sydney, NSW, Australia; The School of Risk & Actuarial Studies, UNSW Business School, UNSW Sydney, Sydney, NSW, Australia)

  • Susan Thorp

    (Discipline of Finance, The University of Sydney Business School, The University of Sydney, NSW, Australia)

  • Shang Wu

    (CEPAR, UNSW Sydney, Sydney, NSW, Australia; The School of Risk & Actuarial Studies, UNSW Business School, UNSW Sydney, Sydney, NSW, Australia)

Abstract

Effective design and regulation of retirement benefits require accurate understanding of how the elderly decumulate. We analyse the income, assets and decumulation patterns of a longitudinal panel of 10,000 Australian age pensioners. On average, age pensioners preserve financial and residential wealth and leave substantial bequests. There is, however, considerable heterogeneity in decumulation patterns. Younger households generally run down financial wealth, while older households maintain their assets or save. Means-testing accelerates decumulation, with average drawdown rates 3% higher for pensioners subject to the income test relative to full pensioners and 9% higher for those subject to the asset test relative to full pensioners. Loss of a partner is linked to large falls in assets. The theoretical, empirical, and practical implications of these findings are discussed.

Suggested Citation

  • Anthony Asher & Ramona Meyricke & Susan Thorp & Shang Wu, 2017. "Age pensioner decumulation: Responses to incentives, uncertainty and family need," Australian Journal of Management, Australian School of Business, vol. 42(4), pages 583-607, November.
  • Handle: RePEc:sae:ausman:v:42:y:2017:i:4:p:583-607
    DOI: 10.1177/0312896216682577
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    References listed on IDEAS

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    Cited by:

    1. Rui Xue & Adrian Gepp & Terry J. O'Neill & Steven Stern & Bruce J. Vanstone, 2020. "Financial well‐being amongst elderly Australians: the role of consumption patterns and financial literacy," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 4361-4386, December.
    2. Jennifer Alonso‐García & Hazel Bateman & Johan Bonekamp & Ralph Stevens, 2021. "Spending from Regulated Retirement Drawdowns: The Role of Implied Endorsement," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 810-847, July.
    3. Ummul Ruthbah, 2022. "The retirement puzzle," Australian Journal of Management, Australian School of Business, vol. 47(2), pages 342-367, May.
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    6. Geoffrey J Warren, 2022. "Design of comprehensive income products for retirement using utility functions," Australian Journal of Management, Australian School of Business, vol. 47(1), pages 105-134, February.

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    More about this item

    Keywords

    Life-cycle saving; portfolio choice; public pension; retirement wealth;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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