HomeFinanceSuperannuationMajority run out of super before life expectancy age, report finds

Majority run out of super before life expectancy age, report finds

Contrary to popular belief, most Australians run out of super before the end of their lives, according to new research.

If you listen to the prevailing wisdom around super, you’ll probably hear that retirees are afraid to spend their nest egg, living unnecessarily frugal lives in retirement and indeed there is some research to back that claim up.

They’re mostly afraid that they’ll run out of money before they die and end up having to rely on income supports such as the Age Pension. This fear was even the driving force behind the Retirement Income Covenant, a government plan to ensure every retiree could make their money last.

Is that fear founded?

The Treasury is worried retirees are leaving enormous inheritances behind when they die, instead of this money be using for its intended purpose – to fund your retirement.

But new research released by the Super Members Council (SMC) suggests that it’s actually retirees that are right to worry, and that the government may have a different problem on its hands.

In its submission to Treasury’s consultation on superannuation in retirement, the SMC demonstrated through its own research that despite the popular narrative, around two-thirds of retirees are drawing more money from their superannuation funds than they are required to each year.

They also found around 80 per cent of men and 90 per cent of women have no super left at all when they reach life expectancy age.

Housing crisis claiming retirements too

The SMC research placed a lot of the blame on more and more people retiring with debt, particularly mortgage debt. Today, more than 40 per cent of workers retire with a mortgage, up from just 16 per cent 20 years ago.

Around 40 per cent of single retirees, and 33 per cent of couples, will use their entire superannuation balance to pay off debts.

A survey of 1000 Australians aged 50 and over conducted late last year by AMP found only one in seven thought they would be able to retire without a mortgage, and one in nine expected to have debts totalling more than $250,000 at retirement.

Ben Hiller, retirement director at AMP, told the Sydney Morning Herald retirees with debt are also more exposed to interest rate changes and represent a significant challenge for financial planners.

“For as long as we can remember, the Australian dream has been debt-free homeownership, which provides the financial foundation and security for a comfortable retirement,” he said.

“While home values and super balances are increasing, research shows that more and more Australians will be retiring with increasing levels of household debt.”

Planning and advice need to be simpler

The research found another culprit for people running out of super was a lack of planning and financial advice, both of which the SMC says are in need of a legislative overhaul.

The SMC was formed late last year by the merger of two previous superannuation advocacy groups, Industry Super Australia and the Australian Institute of Superannuation Trustees.

Its inaugural CEO Misha Schubert told the Australian Financial Review the group wants to use its oversized lobbying power to get make financial advice for retirement simple again, and that there were a “number of practical and actionable” the government could implement quickly.

This includes prioritising financial advice reform legislation that will allow funds, banks and other financial institutions to offer more guidance to retirees and those approaching retirement. Ms Schubert also suggests allowing retirees to add savings to their super accounts when they are in the pension phase.

“There’s a huge opportunity for us to continue to evolve the retirement space for the super system in our country, and a huge appetite for high-quality, low-cost or no-cost advice to help people plan with confidence what [that] looks like,” she said.

“We think there are sensible and elegant innovations that can be embraced here that don’t have a large price tag attached.”

Are you worried about running out of super? How do you think the government can improve the retirement system? Let us know in the comments section below.

Also read: Super fund proposes simplified ‘account for life’ for retirees

Brad Lockyer
Brad Lockyerhttps://www.yourlifechoices.com.au/author/bradlockyer/
Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.


  1. Prioritizing home ownership over superannuation savings would go a long way to solving both the housing shortage and the problem of retirees having mortgage debt. The ”experts” are stupid refusing to consider allowing access to super to buy a home.

    Consider this scenario: X and Y have 2 kids and are trying to buy a house but have insufficient deposit. The house costs $600K. X has $200K in super and Y has $150K. They have another 20 years to accrue super savings before retirement. They can’t afford the house, so they continue to rent, spending 35% of their income on rent and every income increase is accompanied by a rent increase. (Conversely, it they could borrow for a home, their repayments would not necessarily increase continually and over time they would pay a far smaller percentage of income as mortgage repayments and be able to save more!) Meanwhile, 12% of the wage the employer can afford to pay them goes into super – 12% that COULD be enabling them to buy a home is instead loading up a super fund that will buy the same home at 7+ times the price when they reach retirement age.

    Now, fast forward 20 years to retirement, the $600,000 house they wanted now costs $4.8 million (assuming the ‘double every 7 years theory holds true). They draw their super to buy a much smaller and poorer quality home and there’s nothing left.

    Had they drawn $200K from super to buy the house at $600K, it would be paid off by retirement and they would still have $150K in super PLUS 20 years of super contributions and earnings and possibly some personal savings as well from not having to cope with annual rent increases. And they could downsize and add more to their super.

    Common sense isn’t common, and for sure the idiots making this dumb policy of prioritizing super over home ownership have none! Certainly, limit how much can be drawn from super and restrict the kind of home that can be purchased. Do NOT restrict by age or limit to 1st home buyers, as that excludes people who face a crisis or simply make a stupid mistake in their younger years and lose their home. But a house one owns is far better security in retirement than a few hundred thousand in super. Encourage a policy of house first, then savings and we won’t have so many retiring with mortgages and spending their super to pay them out.

  2. When I retired just under 8 years ago after 49.5 years in the work force, I only had 25 years of the Super Guarantee, and also retired with a ($120K) Mortgage, which still has about 5 years to go.
    I am quite sure that that Super WILL run out, well and truly, prior to my passing.
    The only Inheritance my children will get is my Home, which has NOT doubled in value every 7 years since I bought it (according to Lorraine).
    If it had, then it would be valued at close to $1.3M, but, in a recent sales in my area, the maximum sale price was only $800K, and the next closest was $650K !!!!

  3. Contradicts yesterdays story a bit on “Why are retirees still afraid to spend their super? How to beat the fear” and just reinforces what retirees have been saying for years should be listened to.
    Can’t see any party listening to retirees even if we have far valuable worldly advice than their so called top advisers, academic’s and financial advisors that earn millions of tax dollars to tell them what to do and then they still get it wrong.

  4. As a self funded retiree with my wife in aged care and so we are separated by illness we pay a means test /taxof $30.00 day to the government in addition to the other fees of$100.000.00 per year.
    We may soon get a small pension but still pay the daily tax.
    Of course I need to keep my super because I am stroke prone and may have to join my wife in an agedcare home
    I will need the super to fund me.
    This system is so complicated the pollies don’t get it.
    As a 6th generation Australian I am appalled at the way Govts treat its elderly people
    Our pension application has been in with Centrelink for 120 days and as they have all our financial stuff from Agedcaremeans test it is basically a tick andflick

  5. The problem with average life expectancy is that very few live that average lifespan. Those that die early, and possibly unexpectedly, will have money left in their super. At the other extreme, those that make it into their 90’s are likely to run out because (1) the advisors told them to reduce their investment risk 20 years earlier and stick to bonds and term deposits, and (2) old people tend to have more medical and health costs. I can see that the government is considering how to ‘equalize’ retirement incomes by mandating the purchase of annuities – then, those that die early will subsidise those that live longer. A left leaning government will argue this is fair and a ‘payback’ to the community for the tax benefits of superannuation. The government is not finished with meddling with superannuation. The risk is that if there are too many changes superannuation will cease to be an attractive vehicle in which to save for retirement beyond the minimum proscribed contributions.

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