Better data needed on retirement costs

2 October 2018
| By Hannah |
image
image image
expand image

Longevity itself isn’t the problem when securing a comfortable retirement, but rather a lack of knowledge amongst people about how much their lifestyle costs and how that expenditure is likely to change over the course of their retirement, Milliman believes.

A lack of accurate data on personal expenditure in retirement contributed with this, with Milliman saying that the industry had largely relied on estimates and surveys based on individuals’ memories to calculate spending.

Milliman said that retirement simulations should instead consider when retirement spending dips – typically around the end of an individual’s life – rather than presuming that spending would remain the same throughout someone’s life.

Milliman found, for example, that spending consistently declines over retirement by about six to eight per cent in each four-year age band before dropping drastically from age 80.

“This flawed assumption encourages retirees to be over-conservative with their spending. The many retirees who take out account-based pensions and then live frugally by drawing down the minimum allowable rate, is the classic case. Unfortunately they’re banking on a higher cost lifestyle that will never arrive,” Milliman said.

“We need to start to address this problem through the customer’s eyes and not through the industry’s lens. A deeper understanding of real-world data and behaviour is the starting point. It allows us to segment different types of retirees based on multiple facets such as wealth band, postcode, home ownership – the options are endless.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

1 year 6 months ago
Kevin Gorman

Super director remuneration ...

1 year 6 months ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

1 year 6 months ago

The profit-to-member super fund’s MySuper default option has returned 9.85 per cent for the financial year 2024–25....

2 hours 53 minutes ago

Colonial First State (CFS) has announced solid double-digit returns for its MySuper balanced and growth equivalent funds during the financial year. ...

3 hours ago

The super fund’s Future Saver High Growth option delivered an 11.9 per cent return for the financial year 2024–25, on the back of a diversified portfolio and actively man...

22 hours ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
92.15 3 y p.a(%)
3