Households in many countries reach retirement with lump sums of financial wealth accumulated in defined contribution (DC) retirement plans. Retired households need to manage risks and generate income from their savings. We study the dynamics of retirement wealth and portfolio allocation using the three wealth waves of the Household, Income and Labour Dynamics in Australia panel survey. The average retired household maintained or accumulated wealth in 2002-06 and decumulated in 2006-10 consistent with trends in financial asset prices. At older ages, households prefer portfolios with less risk and more liquidity, while maintaining ownership of the family home. The probability of households exhausting financial assets increased over the sample but households who depleted financial wealth did not liquidate their housing wealth at higher rates than other households. In contrast to the U.S., the overall effect of health shocks on the wealth of retired Australian households is minimal but financial shocks have large effects.