How Portfolios Evolve After Retirement: Evidence from Australia

Households in many developed economies now reach retirement with lump sums of financial wealth accumulated through defined contribution retirement plans. Managing wealth from individual accumulations and public provision is critical to retirement welfare. We study the dynamics of retirement wealth and asset allocation using the three wealth waves of the Household Income and Labour Dynamics in Australia (HILDA) panel survey. We find significant influences of ageing on asset holdings with older households preferring less risk and more liquidity, while maintaining ownership of the family home. In terms of absolute changes in wealth the average retired household accumulated in 2002-06 and decumulated 2006-10 in line with financial market trends. More diversified households did better. The probability of retired households depleting non-housing. Finally, in contrast to the US, the overall effect of health shocks on the wealth of retired Australian households is minimal.