26 November 2019 

Fear-based frugality the new black for more retirees

New research from Allianz Retire+ shows shifting priorities in retirement.

Key findings1:

  • 64% of current and prospective retirees don’t feel confident in their financial position.
  • Only 33% feel secure in the event of another economic downturn.
  • 75% are taking a more conservative approach to retirement.
  • 66% are spending only on necessities.
  • Unexpected costs and illness are among top concerns.

More retirees in Australia are spending less on luxuries and buying only necessities, amid fears they are financially unprepared for retirement or an economic downturn, research from Allianz Retire+ has found.

Allianz Retire+ surveyed current and prospective retirees nationwide this year to understand their lifestyle and investment needs – and gain insight into how retirees are responding to heightened sharemarket volatility and a slowing economy.

The results suggest retirees are responding to changing economic conditions by reducing spending and taking fewer investment risks – a trend that could hurt long-term growth in their retirement savings and income.

“Today’s retirees have shifting priorities,” says Allianz Retire+ Head of Customer Experience Jacqui Lennon. “They have less interest in travel and other luxuries, and greater emphasis on maintaining independence, staying in their home, being healthy and caring for family.”

Lennon adds: “Retirees told us they are uncertain and nervous about what’s ahead. They want to be financially confident and secure in retirement, and sleep easy at night.”

Economic uncertainty shaping retiree priorities

Lennon believes a confluence of economic and demographic trends is influencing retiree intentions. “Many retirees have lived frugally over the years. But with term-deposit interest rates at record lows and investment returns falling, more retirees are having to cut back. The result is even greater spending and investment conservatism in retirement.”

Memories of the 2008-09 Global Financial Crisis may be affecting current retiree behaviour, says Lennon. “The GFC was immensely damaging for many retirees, particularly those seven years either side of retirement. Some had to draw down on savings that had tumbled in value, at the worst possible time, and may never recover fully from the GFC. Retirees are worried about how their savings would fare if another GFC strikes.”

Uncertainty was a recurring theme in the Allianz Retire+ survey. Only 32% of prospective retirees and 40% of current retirees felt confident in their financial position. Some younger retirees felt guilt and regret about their financial position.

Demographic, social trends influencing retiree behaviour

Lennon says expectations of living longer than previous generations are also shaping retiree needs. “Many are worried that their money will not last as long as they do or that they will have far lower living standards in the final quarter of their life. They are reducing spending now, so their money can last into their ‘80s, ‘90s or beyond.”

Changing social expectations are another factor. The top five values among retirees surveyed were: maintaining independence/staying in their home; good health/active lifestyle; having enough money to live comfortably day to day; helping and caring for family; and remaining productive.

“A strong theme in the research was that retirees believe being happy is more important than being successful or wealthy,” says Lennon. “Retirees surveyed still want to travel and have occasional luxuries, but the simple pleasures in life matter more.”

Innovative investment approaches needed

Lennon says greater investment conservatism in retirement is understandable, but the risk is not achieving sufficient returns to maintain lifestyle for an increasing lifetime.

“The investment industry needs to respond to changing retiree needs,” says Lennon. “As people live longer, a higher allocation to growth assets such as shares may be needed to generate sufficient returns to ensure their portfolio can go the distance. However, retirees are naturally concerned about equity volatility. They don’t want the stress of sharemarket falls they cannot recover from.”

This thinking encouraged Allianz Retire+ to this year launch Future Safe – an innovative investment product that generates growth potential during retirement, has flexible withdrawal options subject to certain conditions2 and provides protection against sharemarket downturns.

Future Safe suits investors approaching or in retirement – when savings are most vulnerable to a sharemarket fall. Investors choose a protection option that enables them to limit or eliminate the impact of a market downturn based on their maximum acceptable loss in any year. They then choose between exposure to Australian and global shares and a fixed rate return (or a combination) with flexibility to adjust both the investment and protection options annually to meet lifestyle needs or broader portfolio objectives3.

For example, a 60-year-old nearing retirement might choose a -10% Floor (with a corresponding cap) because he or she can tolerate higher risk. If Australian shares fall 20% that year, their loss is limited to 10%. The maximum potential return that year will be subject to the corresponding cap4.

“Retirees told us they will trade some return if they can limit potential loss when investing in shares,” says Lennon. “Knowing the most they could lose is 10%, 5% or zero in a year4 reduces investment uncertainty. We think Future Safe and its low-cost protection goes a long way to solving issues our survey identified – and is the future of retirement investing.”


This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559. Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This material has been prepared by Allianz Retire+ for general information purposes only. It is not comprehensive or intended to give financial product advice. Any general advice provided in this material does not take into account your objectives, financial situation or needs. Before acting on anything contained in this material, you should speak to your financial adviser and consider the appropriateness of the information received, having regard to your objectives, financial situation or needs. Allianz Australia Life Insurance Limited is the issuer of Future Safe. Prior to making an investment decision, investors should consider the relevant Product Disclosure Statement (PDS) which is available on our website (www.allianzretireplus.com.au). No person should rely on the content of this material or act on the basis of anything stated herein. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material. PIMCO provides investment management and other support services to Allianz Retire+ but is not responsible for the performance of any Allianz Retire+ product, or any other product or service promoted or supplied by Allianz. Use of the POWERED BY PIMCO trademark, or any other use of the PIMCO name, is not a recommendation of any particular security, strategy or investment product.

1 Based on Allianz Retire+ survey in 2019 of 702 current and prospective retirees across Australia.

2 Subject to Free withdrawal amounts and any applicable fees and taxes.

3 Investment and protection options are reviewed on an annual basis across the seven- year term.

4 Depending on the chosen protection option (Floor). The greater the level of protection, the lower the Cap.