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How Portfolios Evolve After Retirement: Evidence From Australia

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Abstract

Households in many developed economies now reach retirement with lump sums of financial wealth accumulated through defined contribution retirement plans. Managing wealth from individual accumulations and public provision is critical to retirement welfare. We study the dynamics of retirement wealth and asset allocation using the three wealth waves of the Household Income and Labour Dynamics in Australia (HILDA) panel survey. We find significant influences of ageing on asset holdings with older households preferring less risk and more liquidity, while maintaining ownership of the family home. In terms of absolute changes in wealth the average retired household accumulated in 2002-06 and decumulated 2006-10 in line with financial market trends. More diversified households did better. The probability of retired households depleting non-housing wealth to less than one month�s Age Pension payment increased over the sample. Finally, in contrast to the US, the overall effect of health shocks on the wealth of retired Australian households is minimal.

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  • Alexandra Spicer & Olena Stavrunova & Susan Thorp, 2013. "How Portfolios Evolve After Retirement: Evidence From Australia," Working Paper Series 11, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  • Handle: RePEc:uts:ecowps:11
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    Cited by:

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    2. Niimi, Yoko & Horioka, Charles Yuji, 2019. "The wealth decumulation behavior of the retired elderly in Japan: The relative importance of precautionary saving and bequest motives," Journal of the Japanese and International Economies, Elsevier, vol. 51(C), pages 52-63.
    3. Johan G. Andréasson & Pavel V. Shevchenko, 2017. "Assessment of Policy Changes to Means-Tested Age Pension Using the Expected Utility Model: Implication for Decisions in Retirement," Risks, MDPI, vol. 5(3), pages 1-21, September.
    4. Luigi Ventura & Charles Yuji Horioka, 2020. "The wealth decumulation behavior of the retired elderly in Italy: the importance of bequest motives and precautionary saving," Review of Economics of the Household, Springer, vol. 18(3), pages 575-597, September.
    5. Ralph Stevens & Jennifer Alonso Garcia & Hazel Bateman & Arthur van Soest & Johan Bonekamp, 2022. "Saving preferences after retirement," ULB Institutional Repository 2013/342267, ULB -- Universite Libre de Bruxelles.
    6. Fedor Iskhakov & Susan Thorp & Hazel Bateman, 2015. "Optimal Annuity Purchases for Australian Retirees," The Economic Record, The Economic Society of Australia, vol. 91(293), pages 139-154, June.
    7. Geoffrey Kingston & Susan Thorp, 2019. "Superannuation in Australia: A Survey of the Literature," The Economic Record, The Economic Society of Australia, vol. 95(308), pages 141-160, March.
    8. Guohui Guan & Qitao Huang & Zongxia Liang & Fengyi Yuan, 2020. "Retirement decision with addictive habit persistence in a jump diffusion market," Papers 2011.10166, arXiv.org, revised Feb 2024.
    9. Butt, Adam & Khemka, Gaurav & Warren, Geoffrey J., 2022. "Heterogeneity in optimal investment and drawdown strategies in retirement," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    10. Tae-Young Pak & Hyungsoo Kim & Kyoung Tae Kim, 2020. "The long-term effects of cancer survivorship on household assets," Health Economics Review, Springer, vol. 10(1), pages 1-11, December.
    11. 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.
    12. Andréasson, Johan G. & Shevchenko, Pavel V. & Novikov, Alex, 2017. "Optimal consumption, investment and housing with means-tested public pension in retirement," Insurance: Mathematics and Economics, Elsevier, vol. 75(C), pages 32-47.
    13. Roger Wilkins, 2021. "Economic Wellbeing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(4), pages 469-481, December.
    14. Barbara Chambers & Ruth Walker & Jun Feng & Yuanyuan Gu, 2021. "The silver tsunami: an enquiry into the financial needs, preferences and behaviours of retirees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 645-687, March.
    15. Johan G. Andreasson & Pavel V. Shevchenko & Alex Novikov, 2016. "Optimal Consumption, Investment and Housing with Means-tested Public Pension in Retirement," Papers 1606.08984, arXiv.org.
    16. Maximilian Longmuir, 2021. "Fair Crack of the Whip? The Distribution of Augmented Wealth in Australia from 2002 to 2018," Melbourne Institute Working Paper Series wp2021n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    17. Xiaobo Xu & Jiali Fang & Martin Young & Liping Zou, 2024. "The impact of post‐retirement financial market participation on retirement income sufficiency in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 903-939, March.
    18. 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.
    19. Asiye Aydilek & Harun Aydilek, 2020. "An optimization model of retiree decisions under recursive utility with housing," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(2), pages 258-277, April.
    20. Alonso-García, Jennifer & Bateman, Hazel & Bonekamp, Johan & van Soest, Arthur & Stevens, Ralph, 2022. "Saving preferences after retirement," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 409-433.

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    More about this item

    Keywords

    Retirement wealth; Life-cycle saving; Public pension; Portfolio choice;
    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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