No, we're not spending the inheritance

Thursday, 1st October, 2015

FORGET all those stories about how seniors are living it up and spending the kids' inheritance; a new study shows Australia's age pensioners tend to preserve financial wealth and consume conservatively.

The study by the ARC Centre for Excellence in Population Ageing Research, draws on eight years of Centrelink data of more than 10,000 pensioners whose retirement is funded either by a full or part age pension, with some extras from mandatory and voluntary superannuation balances and from private savings.

It describes how older households, which have accumulated during working life with the intention of funding consumption in retirement, in fact don't fully access all their assets in old age.

Instead they are holding on to their wealth potentially for bequests, as a precaution against uninsurable shocks, and/or unexpected expenditure and a longer lifetime.

"We call them 'buffer stock savers'," said Ramona Meyricke, an associate investigator with the centre.

"To meet daily costs, they rely on the age pension and income from investments, and will avoid dipping into retirement savings which they keep to cover anticipated future health or care costs, and for bequests.

"They are very concerned about unforeseen expenses as they get older, and cautious about preserving assets for protection."

Dr Meyricke said the research shows that Australian pensioners' consumption is often conservative.

"Younger, wealthier pensioners tend to spend more and reduce their savings, but at later ages, most households carry on accumulating assets," she said.

The authors believe pensioners could have less anxiety about their financial future if they had a better estimate of any future medical and aged care costs,and had access to financial products providing longevity, health and aged care insurance.

Age pensioner profiles: A longitudinal study of income, assets and decumulation,

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