Income sufficiency in an aging population : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand
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Date
2022
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Massey University
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Abstract
Using Household Economic Survey (HES) data in New Zealand and Household, Income and Labour Dynamics in Australia (HILDA) data in 2018, retiree direct financial market participation proves to be an effective approach to improve retirees’ post-retirement financial wellbeing, shown in objective and subjective measurements. More specially, those retiree participants enjoy a higher annuitised net wealth and financial situation satisfaction in New Zealand, where universal superannuation is applied. Australian retiree participants have a higher replacement ratio and annuitised net wealth, along with a higher level of subjective financial situation satisfaction, and Australia uses the means-tested age pension system. Financial market participation strongly influences retiree income sufficiency in the objective and subjective measures in both universal and means-tested pension systems. Moreover, age, gender, partnership status, living area, eligibility for government pension, and employment status play certain roles in retiree post-retirement income sufficiency. Different methods, alternative calculations for income sufficiency, and alternative questions for subjective wellbeing results are all consistent with the main results. There is a clear policy implication for governments to encourage retiree financial market participation for better retirement life.
The retiree’s income sufficiency gap is decomposed in Australia and New Zealand using the HILDA and HES datasets in 2018. The Oaxaca method decomposes different influences of demographic traits, individual financial positions, and unobserved factors on retirees’ income sufficiency in Australia and New Zealand with different pension systems. The results show that Australian retirees have a higher level of annuitised net wealth; New Zealand retirees have better life satisfaction. There is no significant difference in subjective financial situation satisfaction. Specifically, Australian retirees benefit more from individual financial positions, especially in homeownership, and New Zealand retirees enjoy better demographic traits, mainly self-rated health and unobserved variables. Relative income sufficiency comparison within each country and different distribution decomposition methods prove the same influence as the main result. The Australian government should improve retirees’ health status for better life satisfaction, while the New Zealand government should encourage homeownership for higher annuitised net wealth.
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Retirees, New Zealand, Finance, Personal, Australia, Retirement income