“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,” Allianz Retire+ head of customer experience Jacqui Lennon said.

Ms Lennon believes a confluence of economic and demographic trends are 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,” she noted. 

The result is even greater spending and investment conservatism in retirement. 

Ms Lennon also noted that retirees are living longer, with different social expectations to generation gone by meaning the needs of retirees are changing.

“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,” Ms Lennon explained.

What can retirees do?

Ms Lennon said 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,” said Ms 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.”

Ms Lennon believes investors should choose an approach, such as stop losses, that eliminates downside risk while allowing retirees to grow their funds.

For example, a 60-year-old nearing retirement might choose a -10 per cent floor (with a corresponding cap) because he or she can tolerate higher risk. 

If Australian shares fall 20 per cent that year, their loss is limited to 10 per cent. The maximum potential return that year will be subject to the corresponding cap, she concludes.