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Expenditure in Retirement or I have enough money to last me the rest of my life, unless I buy something J. Mason, US comedian. Judith A. Davey Institute of Policy Studies Victoria University. Purpose. How do currently retired people spend their incomes?

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Expenditure in RetirementorI have enough money to last me the rest of my life, unless I buy somethingJ. Mason, US comedian

Judith A. Davey

Institute of Policy Studies

Victoria University

  • How do currently retired people spend their incomes?
  • The Retirement Commission aims to ensure that New Zealanders can make informed financial decisions throughout their lives
  • To help younger people in their retirement planning
  • Develop “model” budgets for retired individuals and couples, from Household Economic Survey (HES) data
  • Six focus groups with people aged 65 plus, arranged through community networks, examined the model budgets and commented on how realistic they are in the light of their own experiences
  • Material from the focus groups was used to develop case examples to be used in RC education campaigns and web-site
variations in expenditure patterns hes
Variations in expenditure patterns (HES)
  • By age
  • By sex (living alone)
  • By housing tenure
  • By household composition
  • By location
  • Over time
the case studies rc web site
The Case Studies (RC web-site)

1. Relatively affluent couple – home-owners, two cars

2. Low income couple – home-owners, one car

3. Low income couple – home-owners, no car

4. Single man – home-owner, relatively affluent

5. Single man – renter, low income

6. Single female – home-owner, relatively affluent

7. Single female – home-owner, low income

8. Single female – renter, low income

hints and strategies
Hints and Strategies

When I was young I thought that money was the most important thing in life; now that I am old I know that it is  - Oscar Wilde

Retirement: It's nice to get out of the rat race, but you have to learn to get along with less cheese- Gene Perret

There is nothing more demoralizing than a small but adequate income - Edmund Wilson

  • House insurance almost universal for home owners
  • Some people have cut out contents insurance, taking the risk themselves
  • Many have never had medical insurance and many have given it up because of the cost. Some have cut down on coverage to make it more affordable. Others keep it up to cover pre-existing conditions
  • Concern about increases in rates and low level of rates rebate
  • Cheaper to use gas bottles than to pay for a meter
  • Carrying and chopping wood and lifting gas bottles -too much for older people
  • Heat pumps are expensive and may increase electricity use
  • Many older people use electric blankets and hot water bottles for personal heating
utilities cont
Utilities (cont.)
  • Shop around for cheaper telephone rates and packages
  • Economise on telephone charges by using special rates; get people to ring you
  • Cell phones can be used for emergency, like a personal alarm
  • Personal alarms can be costly
  • Having an internet connection is important for communication, entertainment and education
  • Old houses need more maintenance and are harder to insulate
  • Unexpected costs may be very expensive
  • Many older people defer maintenance
  • Maintenance costs may push older people out of their houses
  • Older people are often unable to do house and garden work
  • Some house adaptations are important if people become less mobile
  • Older people spend little on furniture and may sell off surplus items
  • Special chairs and beds may be needed and can be very expensive
housing appliances
Housing - appliances
  • Often uneconomic to repair appliances
  • It pays to look after appliances and extend their lives
  • Some things you have to replace, e.g fridge
  • Discount stores and sales are good for buying small appliances
  • Friends and family may pass on appliances when they renew theirs
  • Small bench-top ovens, separate grills and slow cookers may be appropriate for older people, especially those living alone, and are more economical on power
  • A freezer is important for frozen meals and buying in bulk
food and groceries
Food and groceries
  • Meat, fruit, vegetables and dairy products are essential but expensive
  • Many older people cannot afford meat every day
  • Cultivating a kitchen garden may be too much for some people
  • Make economies by buying in bulk and going for “specials”
  • Shopping at supermarkets is cheaper than using local shops.
  • Older people are reluctant to cut down on family visits but this can put a strain on their budgets
  • Pre-prepared and delivered meals are good if you have freezer space
  • Allergies and special diets (diabetes, low salt) can increase food costs
  • Gold Card has cut transport costs
  • Reduced confidence or sight problems can reduce use of cars
  • Where couples are used to having a car each, this can be hard to give up
  • Car insurance and licensing costs are increasing
  • Many are unable to put money aside to replace their car
  • Waiting for buses can be hard on legs and knees
  • Community transport sometimes available for medical appointments
  • Taxis are seen as too expensive
  • Mobility vouchers are useful for those who are eligible, but only cover half the cost
entertainment and fun
Entertainment and Fun
  • Seen as an area in which to make economies
  • Meals away from home are a rarity, except as a “treat”
  • Going to the cinema more common than live performance
  • Older people can travel at less popular times and take advantage of cheap fares
  • Holidays can often be visits to relatives or excursions with clubs
  • Some have to withdraw from activities because of the cost of club subscriptions
  • Many people use libraries rather than buying books and magazines. Newspapers and magazines can be shared
  • Pets provide entertainment and companionship, but can entail high costs for care and treatment. Making decisions about these costs can be stressful
clothing and footwear
Clothing and Footwear
  • Spending on clothes is generally low
  • Older people are not averse to buying second-hand clothes, from sales or “seconds” or “hand-me-downs” within families
  • Being at home more means less need for “good” clothes
  • Clothing is often given to older people as gifts, especially socks and jerseys
  • Buying shoes can account for most of the budget. Good shoes are seen as an investment and essential for people prone to falls or who have “bad feet”
personal care grooming
Personal care/grooming
  • Patterns vary between men and women. For both, the main item is hair care
  • Some older people may have to have help with their hair. Others cut their hair themselves or have it done by friends
  • Hair care is important for women and many still go to “their” hairdresser regularly. This is a means of social contact
  • People often receive toiletries – soap, talcum, skin creams – as gifts
  • The cost of medical care for older people varies considerably according to their health status
  • The cut-off for Disability Allowance is just above NZS level. This penalises older people who have savings
  • Dentures, glasses and hearing aids can cost thousands of dollars
  • The cost of dental treatment is a serious concern
  • Podiatry is important for people who cannot bend easily, or have a condition such as diabetes.
  • Health supplements are expensive
  • Older people often have to decide between being on a waiting list and paying for private treatment if they have no insurance
gifts and donations
Gifts and donations
  • Many older people consider it a matter of duty and conscience to continue giving to charities. But this may have to be more selective
  • A lot of importance is placed on marking birthdays and Christmas with gifts to family members and friends
  • An outing with the grandchildren during school holidays to the cinema and for lunch out can be costly
  • The model budgets do not include allocations for lawyers fees and holidays
  • Living in smaller towns can be expensive because they lack a range of services, and transport costs
  • Having “nothing to fall back on” in case of unexpected expenses is a big worry
  • Couples are able to share expenses
  • Retired people have time to shop around and plan ahead
  • Very old people can save on NZS. They spend less, have fewer activities and tend not to replace items
  • The main area for cutting down is entertainment and fun. “It is amazing what you can live without”
What can we learn from the spending patterns of older people?

How are their experiences useful to younger people preparing for later life?

You can be young without money but you can't be old without it.-Tennessee Williams

The key to a happy retirement is to have enough money to live on, but not enough to worry about.- Unknown wise person