Why retirees are too conservative with their spending

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There’s been a body of research and a number of articles to suggest retirees are too conservative with their spending, particularly in the early years of retirement.

In Household Capital’s experience, that’s quite true.

Australians can now expect to have a healthy, active retirement for a longer period of time. It’s not at all unusual for retirees to have twenty or thirty years post-work years. If they have all this time on their hands, why then are they not spending their super?

There are two very good reasons for this.

Firstly, no one knows how long they’ll live. Planning when and how to spend your last cent is next to impossible. This is why many retirees try to maintain a savings buffer for their later years.

Secondly, major expenses can be expected throughout retirement, many of which are unforeseen and most of which couldn’t be funded by a pension. Whether it’s modifying your home to make it safe and comfortable as you age, meeting significant medical expenses or funding the transition to aged care, access to capital is important in retirement. Keeping some ‘rainy day’ funds is a form of contingency insurance.

Each and every retiree’s experience and circumstances are unique; very few people can plan their retirement perfectly. There’s no way to foresee the duration of a given retirement or the costs that will arise along the way.

Using home equity to complement super and the age pension can help you live a more active lifestyle and enjoy greater wellbeing. 

If you’d like to spend more today but would sleep easier knowing you had a ‘rainy day’ fund to fall back on, try this calculator to see how a Household Transfer® could improve your retirement funding and help you to Live Well At Home.

Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable and terms and conditions apply (available upon request). Household Capital Pty Limited is a credit representative (512757) of Mortgage Direct Pty Limited ACN 075 721 434, Australian Credit Licence 391876.

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Total Comments: 6
  1. 0

    Has no-one else posted a comment? I have a “meagre” amount of savings, and I am fearful of spending too much. Maybe I’m worrying too much about spending cents instead of dollars, but even though I have a slight buffer, I worry constantly. The cutting of interest is striking fear into my heart. Savings have flatlined.

  2. 0

    Maybe there are few comments because there is little to add to the answers already given.

    “Firstly, no one knows how long they’ll live.” Yep.

    “Secondly, … keeping some ‘rainy day’ funds is a form of contingency insurance.” Yep.

    Perhaps some don’t spend because they have no wish to purchase more stuff. Many retirees are more into downsizing and culling stuff rather than accumulating more at this stage of life.

  3. 0

    How about we borrow from the equity of the principal home to buy a cheap house to rent out and the rent received can be used to pay back the reverse mortgage? Wonder if that is even possible?



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