Retirement income decisions: Take up and use of Australian lump sums and income streams

George Rothman and Hongyan Wang
Publication type


Paper presented to the 21st Colloquium of Superannuation Researchers, University of NSW, 9 & 10 July 2013.

This paper addresses a range of questions about what people do with their superannuation:

  • How many retirees take lump sums rather than income streams?
    • How many take both?
  • What happens to lump sums at retirement: how are they spent, how invested?
    • How significant is debt at retirement?
  • What are the main components of retirement assets?
  • How are the funds generating an income stream drawn down over time?

Where quality data can be obtained, the paper attempts to show how the answers to the above questions vary by age, gender, and income, and whether the patterns vary over time.

Many of the questions have, of course, been asked before. Where this paper adds value is in the comprehensiveness of its approach and the data analyses based on some large new datasets that have been assembled by the Treasury.

These are important questions that are highly relevant to modelling retirement behaviour and the adequacy of retirement incomes. They are obviously also relevant to government pension costs and to policies impacting on the sustainability of Australia's age pension system. Somewhat less importantly, there is also an impact on estimating tax receipts from retirees.

While retirement can be a complex process, sometimes involving a gradual reduction in hours of work before full retirement and with the possibility of returning to work after retirement, this paper mostly uses a simple framework that says a person is either in the labour force or is fully retired.