Super myths – a tale of have and have not

New superannuation industry research disputes persistent claims that retirees are sitting on their retirement nest-eggs instead of spending up, as government policy intends.  

The myth has evolved that many are underspending and living frugally so they can pass wealth on to their families, and/or they are unrealistically worried their nest egg won’t last their lifetime. 

But a recent report from super industry group, Super Members Council (SMC), contradicts this, finding that drawdowns from super are now typically higher than the minimum drawdown amounts required under government super policy. 

There are many factors influencing the spending behaviour of superannuants. One is an emerging trend that older workers have to rely on their super because they can no longer do salaried work, or find work, but are too young to access the Age Pension. More on that dilemma later.

The SMC report says in 2024–25, around 68% of tax-free retirement account holders withdrew above the minimum, with this proportion even higher for those with less than $50,000 in super (81%). 

Retirees aged 65-69 are drawing down the most across both working life super accounts and retirement super accounts. This rate falls as retirees enter their 70s, but rises again in their 80s driven by higher aged-based minimums and increased health and aged care costs. 

SMC says the myth about underspending distracts from what it says is the real issue – the complexity of the retirement transition, which it says is causing “decision paralysis” for many pre-retirees, which can cost them financially. 

The report finds a typical new retiree with super could miss out on as much as $136,000 (or $6,500 a year) over the course of their retirement due to the “daunting complexity of Australia’s retirement system”. 

The SMC proposes an adjustment of minimum drawdown requirements for retirees with low account balances and strategies to encourage drawdowns above the minimum across varying balance levels. 

Some Australians with modest super balances are discouraged from entering the retirement phase due to mandatory drawdown rules, which don’t align with their financial needs. 

“Retirees are not underspending their super. It’s time we retire that myth and focus on making retirement simpler, easier and more intuitive for everyday Australians,” said SMC CEO, Misha Schubert. 

“The race is on to get ahead of the coming silver tsunami of retirees. A simpler, smarter pathway to retirement will help more Australians retire with confidence and the certainty they can pay for things they need.”

A key worry for retirees and those planning retirement is whether their savings will fund the level of comfortable retirement they aspire to. Expectations about how long we’ll live, our health, and how long we can work are key concerns. 

For many workers in their 60s, or even younger, this gap is already financially hitting hard. Forced to leave paid work through retrenchment, injury, or illness, they face an “earlier than intended” retirement, which they can’t afford. 

For these workers, retirement can be financially terrifying. The common thinking is that while they wait to get the pension, they can access their super (at age 60). However, as the pension age requirement is pushed out (now at 67), the retirement funding gap can deliver a retirement of poverty and ill health.  

For many workers in trades, construction, aged care, hospitality, or nursing jobs that are physically and emotionally demanding, the idea of continuing until 67 is often not just impractical, but dangerous. 

Australia’s rising retirement age and rigid pension rules better reflect the lives of healthy, white-collar professionals – not the lives of low paid manual workers, people whose bodies don’t last as long and whose earnings never allowed them to build the retirement buffers that government policy assumes. 

Ageing issues newsletter, HelloCare, says our existing super and pension system is based on a one-size-fits-all retirement age is no longer fit for purpose. 

The newsletter proposes reforms that recognise: 

• That physical work takes a cumulative toll 
• That financial precarity cannot be fixed by pushing retirement further out of reach 
• That job market discrimination is real and punishes those who try to stay employed 
• That health, not just age, should help determine retirement eligibility. 

HelloCare says reforms could include: 

• Flexible pension access for those in physically demanding roles 
• Higher super contributions for low-income and female workers 
• Better supports for older jobseekers facing proven age bias 
• An honest national conversation about the growing gap between life expectancy and work expectancy. 

It concludes: “Because right now, for too many people standing at that fork in the road between ‘work’ and ‘retire’, both paths are broken.”