Rich versus poor in retirement

New research has found that the expenditure levels for most retirees is similar, regardless of income – but low-income households are spending more than their income.

The study of around 8000 households, was conducted by Monash Business School’s Australian Centre of Financial Studies (ACFS), using data from the Household, Income and Labour Dynamics (HILDA) survey.

It showed that single retirees aged 65–74 spend an average amount of $18,400 annually, with couples in the same age range spending an average of $33,200.

The Association of Superannuation Funds of Australia (ASFA) retirement standard estimates that, to live a modest lifestyle, single retirees aged 65–84 would have to spend $23,489 while couples would need to spend $33,784. To live a comfortable lifestyle, single retirees in the same age range would need to spend $42,579 with couples spending $58,326.

The results of the survey also showed that income plays less of a role in required spending for retirement. Rather, it seems regional variations have more influence on retirement expenditure, with the average household in Sydney spending just over $44,000, compared with $34,000 for Melbourne retirees and $25,000 for those living in Tasmania.

As with the ASFA standard, which assumes that retirees own their home, the ACFS research does not take into account the fact that many retirees are still renting. The study claims that 15 per cent of all retirees are renters, with eight per cent still paying off a mortgage.

Other key findings of the report include:

  • Housing costs are high for those who do not own their homes.
  • Self-funded retirees have a higher standard of living than those relying on the Age Pension.
  • Today’s retirees spend more than earlier cohorts at a similar age.
  • Household spending does not decline through the course of retirement.
  • Superannuation is the fastest growing source of retiree household wealth.
  • Wages and super contribute significant income in the early stages of retirement.
  • Food is the major expense for retirees over 65.


The Australian Institute of Superannuation Trustees (AIST) CEO Tom Garcia said the research challenges traditional notions of retiree spending and hopes it will influence discussions about “the fairness of the super tax concessions, super’s objective and what is considered to be an ‘adequate’ income in retirement”.

“Learning more about what retirees actually spend compared to their income will help us make evidence-based decisions about adequacy and super policy,” Mr Garcia said. “There are a lot of myths and fear about what retirees need to live on. This study suggests that most older households, including wealthy ones, have relatively modest expenditure and – on average – have the highest financial satisfaction.”

Read the ACFS report

Opinion: Use this data with caution

If the aim of this report is to help shape future retirement policy and planning, it should take into account the housing (un)affordability trend which, on its current course, will affect retirement spending and make this data almost irrelevant.

The study was created using HILDA data over a period of 12 years. So it’s fair to say that it does provides an overview of modern retirement, although there are new implications that may not be accurately predicted by using older data.

YourLifeChoices’ research taken from the August 2016 Retirement in a digital world survey (with over 5000 respondents), indicates that 13 per cent of retirees are renters, 16 per cent are still paying off a mortgage and the remaining 71 per cent are homeowners. A report by ING Direct shows that, these days, retirees will enter retirement with an average debt of around $158,000. The same report estimates the number of over 65-year-olds with mortgages has increased by 28 per cent in the past three years alone.

Our own research provides a more accurate ‘snapshot’ of retirement and, if it’s anything to go by, the proportion of retirees who are still paying off a mortgage will increase year on year.

The average cost of rent paid on a one-bedroom apartment in Australia is around $16,900 per year. If expenditure is the same for the rich and the poor, it is no wonder that renting retirees struggle to make ends meet.

Of the 3.57 million Australians aged over 65, a staggering 33 per cent – or 1.2 million – of those live in poverty. So, is it fair to say that, maybe, ultra-wealthy retirees are skewing the ACFS data by offsetting the spending of the very poor?

Saying that older households enjoy the “highest financial satisfaction” might also be a bit of a stretch, especially considering that low-income households are already spending more than they earn. This proves the danger of generalising from ‘averages’, where the wealth of one individual, such as Gina Rinehart, can dramatically skew the results.

The reports states in its introduction:

“…the analysis should be used to help shed further light on the range of standard living incomes for retired Australian households at present”. It also aims to “improve the understanding of the Australian pension system, including the use of both the [Age Pension] and superannuation entitlements” and “understanding the likely pattern of expenditure in retirement may help improved decision making on planning for the retirement phase”.

So, if this report is to be taken as advice by the Government or the individual, it must be noted that it does not consider retirees who are renting or paying off a mortgage. Even if we add just $10,000 per year in rent or mortgage costs, retiree expenditure, based on the ACFS estimates, falls well short of what is required for a modest standard of living.

The difference between low-income earners and high-income earners is that the wealthy cohort still has the disposable income to pay off a mortgage. Low-income earners will have to take on debt or sell off assets to meet their living expenses.

Australians entering retirement (who don’t own a home) expecting to spend only what is quoted in the ACFS report could be in for a rude awakening.

Do you agree with the ACFS figures? Are you comfortable in retirement? If so, is it because you own your home? Do you think this data could be skewed by the ultra-wealthy?

If you have a few spare minutes this week, we’d love you to share your thoughts on Retirement in a digital world.

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Are you spending too much?
How do we tackle rising inequality?

Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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