Are retirees frugal or just broke?

Two respected research institutes have found that the majority of Australian retirees are spending well below their income, including those on Age Pensions. YourLifeChoices asks the question whether, in looking at the average expenditure, these findings take into account the two ends of the scale – the affluents versus the cash-strapped?

These surprising results come from research done by the Milliman Retirement Expectations and Spending Profiles (ESP) and a report on the Superannuation Guarantee Contribution (SGC) by the Grattan Institute, Not so super.

The Milliman Retirement ESP notes that the peak spending period for retires is between 65 and 69, followed by a steady decline until they reach 85 and over, when there is a dramatic drop in spending. These findings have lead Milliman to warn that retirees may be saving funds for later years that they simply don’t need. The commonly accepted target of 70 per cent of pre-retirement income, Milliman suggests, may be too high a target. And may encourage retirees to be unnecessarily frugal.

These findings are aligned with suggestions in the Not so super report that retirees are becoming ‘over-funded’ for retirement. Specifically, the Grattan Institute argues that the current goal to increase SGC from its current rate of 9.5 per cent of wages to 12 per cent will do little to boost retirement incomes of low-paid workers and will cost the Federal Budget far too much.

The Grattan Institute report states that:

“Current levels of compulsory super contributions, along with non-super savings (such as shares, bank deposits and interests in businesses or investment properties) and the age pension, are likely to provide a reasonable retirement for most Australians.”

It continues:  

“Many low-income Australians will get a rise in pay when they retire, because the age pension and the income they get from compulsory retirement savings will be higher than the wage they received during their working life.”

At the Retirement incomes – do we have a problem? policy pitch at the Victorian State Library recently, Grattan Institute CEO John Daley noted that many retirees are so frugal they spend below the Age Pension income level in retirement, leaving their money as an inheritance.

The findings are at odds with the experience of many YourLifeChoices members as revealed in our recent financial literacy survey and in comments on our many articles on this topic. Survey responses tell us that 81 per cent of YourLifeChoices members are concerned their savings will not last as long as they will. And 56 per cent tell us that they run out of money in the days leading up to pension payments.

To quote member, Rainey: “Nobody can be expected to live within their means when their income is virtually stagnant and the prices of essentials are skyrocketing. Look at the price of electricity. I guess ‘live within your means’ means turn the lights off and freeze to death in cold weather?”

Or Rosret, who says:

“I have no idea how anyone manages on a pension. It’s fine until you need more than just food and clothing, i.e. the roof gets a leak or the oven breaks down etc. They you need to step into the real current world of tradesmen who seem to charge phenomenal wages for their time.”

In addition to the cry from the heart of real retirees who are best qualified to share what it is like to live on a restricted income, facts speak for themselves.

The most recent YourLifeChoices Retirement Affordability IndexÔ notes the situation for cash-strapped singles and couples – those pensioners who are renting:

Per fortnight


Couple each

Couple together

Maximum basic rate




Maximum Pension Supplement




Energy Supplement








Per week




Per annum




By retirement tribe:
















It seems fair to conclude that single pensioners have only $5 left over, or slightly more if receiving the rental supplement. And couple pensioners may actually be out of pocket. Those living in their own homes are better off, but if household maintenance expenses or health costs are high, they, too, may have no spare change at the end of the week or year. 

It’s difficult to conclude from our calculations that retirees are under-spending. The difference between our conclusion and the reports by Milliman and the Grattan Institute may be that they are working on averages – where the expenditures of the well-off are averaged with those on the lowest incomes. In comparison, YourLifeChoices’ household expenditure in retirement is based on six different tribes and shows three very different retirement scenarios at play in Australia today.


What is your experience? Are you a frugal ‘under-spender’ as reported by Milliman or the Grattan Institute? Or are you spending most of your retirement income on day-to-day expenses? Tell us what it is really like.

Related articles:
Cost of living rising
Medical gap costs retirees
Your view on homes test

Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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