Economic uncertainty driving retirees to spend only on bare necessities

author-avatar By on November 27,2019
Economic uncertainty driving retirees to spend only on bare necessities

Photo by Jeff Sheldon on Unsplash

More retirees in Australia are spending less on luxury items and buying only necessities, amid fears they won’t be financially prepared in an economic downturn, new research from Allianz Retire+ has found.

The survey asked current and prospective retirees about their lifestyle and investment needs, and how they’re responding to increased volatility in the sharemarket and a slowing economy.

The report found retirees are responding to the changing economic conditions by cutting back on their spending and taking fewer investment risks, but this may jeopardise their long-term growth in retirement savings and income.

Allianz Retire+ Head of Customer Experience Jacqui Lennon said today’s retirees have different priorities.

“They have less interest in travel and other luxuries, and greater emphasis on maintaining independence, staying in their home, being healthy and caring for family,” Ms Lennon said.

“Retirees told us they are uncertain and nervous about what’s ahead. They want to be financially confident and secure in retirement, and sleep easy at night.”

Ms Lennon believes a mix of economic and demographic trends are influencing retiree intensions.

“Many retirees have lived frugally over the years. But with term-deposit interest rates at record lows and investment returns falling, more retirees are having to cut back. The result is even greater spending and investment conservatism in retirement.”

While being more conservative about investments in retirement is understandable, Ms Lennon said it puts retirees at risk of not achieving strong returns to maintain their lifestyles.

“The investment industry needs to respond to changing retiree needs. As people live longer, higher allocation to growth assets such as shares may be needed to generate sufficient returns to ensure their portfolio can go the distance,” Ms Lennon said.

“However, retirees are naturally concerned about equity volatility. They don’t want the stress of sharemarket falls they cannot recover from.”

Fears of another financial crisis could also be having an impact on retiree behaviour.

“The GFC was immensely damaging for many retirees, particularly those seven years either side of retirement. Some had to draw down on savings that had tumbled in value, at the worst possible time, and may never fully recover from the GFC. Retirees are worried about how their savings would fare if another GFC strikes.”

Expectations of living longer than generations before are also shaping retiree needs.

“Many are worried that their money will not last as long as they do or that they will have far lower living standards in the final quarter of their life. They are reducing spending now, so their money can last into their ’80s, ’90s or beyond.”

The research found that changing social expectations may also have a part to play. The top five values among retirees surveyed were: maintaining independence/staying in their home; healthy and active lifestyle; having enough money to live comfortably day to day; helping and caring for family; and remaining productive.

“A strong theme in the research was that retirees believe being happy is more important than being successful or wealthy,” Ms Lennon said.

“Retirees surveyed still want to travel and have occasional luxuries, but the simple pleasures in life matter more.”

The survey also found retirees living in regional areas are less likely to monitor investment performance or seek financial advice, and are less financially secure than those living in the city.


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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand.

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