Spending versus saving – the retirement conundrum

man contemplating spending versus saving

When it comes to managing finances, it’s possible to distil it down to a very simple term: spending versus saving. Such an approach may sound simplistic. In truth, it probably is, but stripping the philosophy back to bare basics might actually be useful.

After all, isn’t financial planning and management merely an amalgamation of answers to the question, ‘Should I buy or save the money?’ And from there, going down one level further based on the answer:  ‘Should I buy this or that?’ Or, if you are saving the money, ‘Should I invest here or there?’

These are questions we must answer throughout our lives. They remain relevant as we head into or continue the retirement phase. And it seems that most of us, when it comes to the spending versus saving conundrum, tend to opt for the latter.

When the federal Treasury released its Retirement Income Report in 2020, it found that, “most people die with the bulk of the wealth they had at retirement intact”.

The report speculated on why this might be so: “It appears they see superannuation as mainly about accumulating capital and living off the return on this capital, rather than as an asset they can draw down to support their standard of living in retirement.”

Spending versus saving – a choice between two miseries?

On the surface of it, there’s nothing necessarily wrong with this strategy. For those with children and grandchildren, it can provide comfort and certainty, knowing they will benefit from their inheritance.

But what is the price of that comfort and certainty? If it is not doing the things in life you had hoped to, is it one worth paying? What if your own children and grandchildren adopt the same philosophy? Ultimately, might that mean leaving wealth to future generations, but also happiness and contentment?

Professor Susan Thorp, from the University of Sydney’s Business School, proposes this spending versus saving struggle leads to another, different battle. She cites the work of psychologist George Lowenstein to suggest that the question is a choice between two miseries.

“In dealing with this retirement problem, basically, you’re facing two possible forms of misery,” Prof. Thorp said. “One form of misery is expending your resources too quickly and finishing up destitute. The other one is spending them too slowly and dying without having had as much as much fun as you could have.”

Finding a balance

The landscape painted by Prof. Thorp and George Lowenstein certainly seems rather bleak. I’m not sure that the spending versus saving choice delivers one of two types of misery to everyone.

I would cite my own mother as an example. Nothing made her happier than seeing her family happy. I used to worry that she was missing out on wonderful life experiences because she devoted so much time to ensuring her family had them. And she may well have missed out on some, but these fuelled happiness in her, not misery.

Having said that, I do believe she and dad could maybe have indulged a little bit more before they passed away last decade.

Ultimately it all comes down to balance. It’s a balancing act involving happiness, contentment and anxiety, not just yours but your family’s too. Achieving that balance might require a bit of thought and preparation. That’s where financial planners can be useful.

A financial planner might not be able to help you decide what the balance of happiness and anxiety is. A good one should, however, know how to help you achieve it.

With appropriate advice and planning, the question of spending versus saving can become a simple choice rather than a battle.

Do you worry about not having enough super to see you out? Or are you worried you’ll leave too much behind? Let us know what you think in the comments section below.

Also read: Explained: Superannuation co-contributions

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account 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 making a decision based on this information, you should consider its appropriateness in regard to 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.

Written by 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.


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  1. You can never end up destitute in Australia as long as we have our wonderful age pension available. It’s been there for over a century and it will still be there in another century.
    Live for today as the only future you have is an early death or a nursing home.
    And the best nursing homes are the cheap public ones which the pension covers not the expensive private ones with their fake pretence of caring when the only thing they care about is getting their hands on your money.

  2. Totally unfair system
    My wife is a lot younger than me so my pension is single rate for two people with health problems..
    We live in caravan park cheap cabin which classes us as home owners so we can only have less assets before cutout….
    Super under 300k should NOT be counted as asset…
    The rich will still get their tax cuts, while low income rebate abolished..
    And politicians pay and perks increase while they mis manage millions…

  3. I do not consider our age pension system “wonderful” and it has changed often and dramatically over the time it has existed.
    Having viewed a number of nursing homes it s absolute hogwash that the best are the cheap public ones.
    I do agree that our politicians have feathered their own nests but for fairness, the assets test should be abolished (why $300k?). The universal pension used to exist and Australia used to be a leader among nations but now a class system has been created.

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