How spending less in retirement could cost you more

The COVID pandemic has changed the way many of us live. More so, perhaps, for older people, given many over-50s are more vulnerable to the virus.

As a result, some people have been reluctant to partake in social activities to the extent they might have before the pandemic. A consequence of such reluctance is that many retirees are spending far less of their superannuation than they did pre-COVID.

Data released by the Australian Prudential Regulation Authority (APRA) shows that retirees withdrew $110 billion from their retirement accounts in the year to March 2021. Just 12 months later, that figure had fallen $83.9 billion for the ending March 2022.

Read: Retirees to benefit from superannuation changes

That 16 per cent fall may be attributed to several pandemic-related factors. In addition to spending less socially, retirees have also faced increasing prices on fuel and across the retail sector.

Evidence also shows that pensioners are generally reluctant to only draw down on the interest portion of their super balances. As a result, they may be short-changing themselves in two ways.

The less retires draw from their pensions, the more they will pay in fees over their lifetimes.

And they will likely be consigning themselves to a far more frugal retirement than is necessary.

Read: Pay off the mortgage or top up your superannuation?

Ian Fryer, research chief with Chant West says that, in retirement, pensioners will pay between two and four times the fees they paid during accumulation years.

“While some estimates put the difference at as high as four times, if you factor in the inflation rate then you would pay about two times the level of fees in the retirement phase of super than you would during the accumulation years,” Mr Fryer said.

For many, the reluctance to spend more than accrued interest can be put down to fear of running out of money before they die. However, recent indications are that most people overestimate the amount they’ll need in retirement.

Read: 50,000 super fund members victims of data breach

Many retirees also believe that most of their superannuation was accrued through the contributions they made while they were still working. In fact, that accounts for only about a third of the total.

Taking inflation into account, the other two-thirds come in roughly equal proportion from interest accrued while they were working and interest accrued during retirement.

What is the lesson to be learnt from this? Cast aside the notion that spending any of your retirement capital – as opposed to just the interest – will ruin your retirement. From a happiness perspective, you’re more likely to ruin your retirement by not spending a bit of capital.

Are you overly cautious with your retirement spending? Or are you happy to eat into your superannuation capital? Why not share your experience and thoughts in the comments section below?

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without considering your objectives, financial situation or needs. It has been prepared with due care, but no guarantees are provided for the ongoing accuracy or relevance. Before deciding based on this information, you should consider its appropriateness regarding your own circumstances. You should seek professional advice from a financial planner, lawyer, or tax agent in relation to any aspects that affect your financial and legal circumstances.

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Andrew Gigacz
Andrew Gigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.


  1. I’m quite happy to use my Super for retirement.
    I have a spending plan (Budget) worked out, I know how much we need to live on each week. No pension for us so we live off Super.
    Our interest and earnings go towards funding our lifestyle and any extra requirements are topped up from our capital.
    When the Super balance falls below a certain level Centrelink pension will kick in and the country can pay us back some of the tax we have paid them during our working lives.
    Our Super doesn’t need to last us our whole life, just enough to last through our active years for travel and enjoyment.
    When we go into the inactive and frail stage of aging we won’t need much funds to live on as we’re not fit to spend or to travel.
    Buggar the kids, they can build their own Super nest egg 🙂

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