Decumulation refers to the process of drawing down savings that have been accumulated over the working life to provide income in retirement. Since the inception of KiwiSaver in 2007, regulators, policymakers and providers have focused on the accumulation phase of saving in KiwiSaver. However, KiwiSaver has now been in existence for more than 14 years, and it is expected that individuals approaching retirement are now doing so with larger sums of money accumulated in KiwiSaver. We see the focus is switching to decumulation and what this means from a product and policy perspective.
Much of the work we conduct focuses on enabling New Zealanders to retirement comfortably once they reach 65. Less well understood are the financial experiences of those nearing and past retirement age.
Our research aims to reveal more about the experiences of work, income, expenses, and financial advice among those close to retirement and those already retired. Of specific interest was how those aged 65 accessed and spent any savings and income (including Kiwisaver).
Expenditure patterns of New Zealand over 65 households
This research uses household-level data from the New Zealand Household Economic Survey to examine expenditure patterns of over 65s.
Household expenditure patterns differ significantly across demographic groups and income levels.
As households age, they spend less, especially on discretionary categories such as clothing, transport, and recreation and culture. The research finds that subjective wellbeing is higher for over 65 households who have higher qualifications, own their home, have higher incomes, live with their partner and have no dependent children, and is the lowest for rent-paying renters, single living with others and Māori households.
Asset drawdown (decumulation) and paid work profile of pre- and post-retirees
This research reveals more about the experiences of work, income, expenses, and financial advice among those close to retirement and those already retired. Of specific interest was how those aged 65 accessed and spent any savings and income (including Kiwisaver), referred to as ‘decumulation’.
Interviews with retirees on their spending habits
A series of interviews with New Zealand retirees provides a better understanding of what they are spending in retirement. Case studies explore each person’s journey into retirement, including any planning they undertook prior to retirement, what day-to-day life looks like as a retired person, their current expenditure, impacts of unexpected expenses, and any advice they would give to those planning on retirement.
Findings show that many ‘sleepwalked’ into retirement, without giving financial or lifestyle planning much thought. Participants suggest regular prompts to discuss and consider retirement plans are necessary, as well as sharing sources of advice, support and case studies.
Decumulation in the 2022 RRIP
The 2022 RRIP investigated decumulation – the process by which savings and investments are used to pay for retirement – “drawing down savings.”
Research found that more education is required to support New Zealanders using their savings in retirement, including guidance and “rules of thumb” for spending their KiwiSaver.
Decumulation research from previous RRIPs
A paper commissioned for the 2019 RRIP provided an assessment of decumulation of retirement savings and other assets. Download the paper.
Another report from the 2019 RRIP also considered decumulation, and considered decumulation models available in a number of OECD countries. Download the report.
The 2016 RRIP looked at decumulation from a number of perspectives, including surveys, reports and interviews with the public.
Additional information and resources
The Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries have produced a number of reports considering decumulation.
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How to make drawdown a success - NZ Society of Actuaries
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Decumulation rules of thumb: An update - NZ Society of Actuaries
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Longevity in New Zealand: Implications for retirement income policy - NZ Society of Actuaries
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Retirement income policy in New Zealand: A discussion of context and principles - NZ Society of Actuaries
Other publications
The research listed below does not represent the views of TAAO. Different approaches, methods, and samples were used in these studies and this should be taken into account when interpreting the results.
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Noviarini, J. (2020). Essays on retirement wellbeing in New Zealand (Doctoral dissertation, University of Otago).
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Lissington, R. J. (2018). How prepared are New Zealanders to achieve adequate consumption in retirement? (Doctoral dissertation, Massey University).
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Bailey, J. V., & Winkelmann, K. D. (2021).Chapter 6: Asset decumulation in retirement. In Defined Contribution Plans: Challenges and Opportunities for Plan Sponsors. CFA Institute Research
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MacDonald, B. J., Jones, B., Morrison, R. J., Brown, R. L., & Hardy, M. (2013). Research and reality: A literature review on drawing down retirement financial savings. North American Actuarial Journal, 17(3), 181-215.