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Why are retirees still afraid to spend their super? How to beat the fear

You’ve spent years building your superannuation balance for retirement. So, why is it so hard to spend that balance once you get there? You don’t have to fear spending your super.

If you ask retirees what their greatest fear is, and running out of money before they die will be high on the list.

It’s this fear, whether rational or not, that makes many retirees extremely reluctant to spend their superannuation in retirement. They are fearful of being unable to cover things like unexpected medical bills and residential aged care – costs that will only increase in price as you get older.

While this fear may be based in logic, the reality is it leads to many retirees living unnecessarily frugal lives in retirement and leaving behind massive inheritances.

In fact, it was this fear of spending your superannuation too quickly that led to the creation of the Retirement Income Covenant (RIC). Despite having the superannuation system in place for decades at that point, studies showed that when they died, most retirees had more than 90 per cent of the assessable assets they had at the point they retired.

From that finding, the government drafted the RIC, a document that legally compels super funds to have concrete strategies in place for their retired members to maintain adequate income for life.

Why do we find it so hard to spend in retirement?

There are many reasons a person may be reluctant to spend their super, but most of them boil down to a single fear – the fear of running out of money before the end of your life.

It’s not an unreasonable fear. People face a number of unknowns as they head into retirement, including how long they will live and how the economy will perform long-term.

Danielle Labotka, a behavioural scientist for Morningstar Research Services, told the Australian Financial Review the ‘consumption gap’ between what retirees could be spending and actually are spending, is understandable in this environment.

She says there are also other psychological factors at play.

“For one, there is the difficulty of switching from one habit [saving] to another [spending],” she says.

“Imagine if someone asked you to switch the hand you use to brush your teeth after decades of doing it a certain way. It would feel unnatural, and you might even just fall back into the old habit,” she says.

How can we get over this fear of spending?

If you’re looking to change your mindset and confidently spend more confidently and actually enjoy retirement, it’s important to take stock of what you want to achieve in retirement.

For example, if travelling the world is a retirement goal for you, you’ll want to prioritise spending more earlier in your retirement, when you are more physically able to enjoy your holidays.

Behavioural researcher Samantha Lamas says this kind of goal-setting is sadly lacking in many new retirees and those approaching retirement.

“The issue is that many retirees do not consider their goals when developing their retirement spending plan,” she says.

“Instead, they are stuck in a psychological quandary. Many retirees are so preoccupied juggling their competing desires to enjoy their retirement and not to run out of money, that their goals get lost in the fray.”

It can help retirees to reflect on what their personal values are or what their purpose will be in retirement. Once they understand what is really important to them, it can help them get out of this psychological quandary and understand how they will achieve their goals.

“Tapping into their life values may help retirees identify what matters most to them and find different avenues for spending their money and being content.”

How much are you spending each year in retirement? Are you worried about running out of money? 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. retirees might spend more if they felt safe to let go of the 4% Rule i.e. only spend 4% of investment each year to avoid depleting your retirement savings. In practice this means that many conservative retirees are trying to survive on income from interest and dividends rather than spending down the super nest egg and thriving in retirement. Fear of running out of funds for increased health and aged care costs at end of life is a strong incentive to save.

    Actuaries suggest that spending 7% is a more realistic amount for most. The 7% reflects the sharemarkets and long term future investment cycles.

    Choosing between the 4% and 7% rules for retirement largely depends upon personal circumstances, spending flexibility, and risk tolerance. The 4% rule might remain the best guide for retirees with less flexible spending and more averse to the risk of outliving their savings.

  2. The problem is the uncertainty of what lies ahead. I now have to take out 7% of my super every year but I then transfer it to my ING savings account which gives me 5.5% interest. The cost of age care is massive and it’s a lottery as to if and when dementia sets in. Also we rent and that’s now gone up to $870 per week. We can’t move because there’s nowhere else to live. With the increasing housing shortage, how much higher are rents likely to rise ? Give me answers to those questions and I might be less frugal.

  3. There are two huge concerns for retirees that logically stop them spending.
    (1) Inflation. Basic living costs can skyrocket suddenly, with no corresponding increase in income. Retirees have to find a way to pay more for everything with the same income as before. The buying power of their savings is reduced, and they have no way to restore its value.
    (2) Health care and aged care costs are terrifying, and retirees have no way of predicting when or for how long they might need costly medical care, home help, or personal care. Government programs do not cover these costs adequately – particularly for those who committed the hideous sin or saving for retirement or retaining an asset like a family home. Even those with very modest savings are compelled to make a large contribution to their care costs, while those with nothing get free care but perhaps not the quality of care they would like.

    The claim that people spend less later in life proves false if they have significant health issues and particularly if they can’t manage their home or personal care without help.

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