How Portfolios Evolve After Retirement: Evidence from Australia

Wiley: 24 months
Publication Type:
Journal Article
The Economic Record, 2016, 92 pp. 241 - 67
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Households in many countries reach retirement with lump sumsof financial wealth accumulated in defined contribution retirementplans. Retired households need to manage risks and generateincome from their savings. We stud y the dynamics of retirementwealth and portfolio allocation using the three wealth waves of theHousehold, Income and Labour Dynamics in Australia panelsurvey. The average retired household maintained or accumulatedwealth in 2002– 2006 and decumulated in 2006– 2010 consistentwith trends in financial asset prices. At older ages, householdsprefer portfolios with less risk and more liquidity, while maintain-ing ownership of the family home. The probability of householdsexhausting financial assets increased over the sample, but house-holds who depleted financial wealth did not liquidate their housingwealth at higher rates than othe r households. In contrast to theUSA, the overall effect of health shocks on the wealth of retiredAustralian households is minimal, but financial shocks have largeeffects.
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