FOR decades, Australians have been given a simple message about superannuation: save as much as you can for retirement.
But when retirement finally arrives, switching from saving money to spending it can be surprisingly difficult.
New modelling from Aware Super suggests some retirees could potentially spend almost $25,000 more in their first year of retirement by making greater use of their superannuation rather than sticking to minimum withdrawals.
At the heart of the issue is something many retirees will understand – the fear of running out of money.
After spending 40 or 50 years watching the bank balance, paying off a mortgage and building super, suddenly being encouraged to draw those savings down can feel uncomfortable.
Aware Super CEO Deanne Stewart said Australians had become very good at learning how to save, but many needed more help understanding how to confidently use those savings once they retired.
“For decades, Australians have been taught the importance of saving, now we need to help them feel confident to spend those savings in a way that supports the retirement they worked so hard for,” Ms Stewart said.
Aware Super describes the concern as “fear of running out”, or FORO, and says almost half of its new retirees plan to initially draw down only the legislated minimum from their retirement savings.
That caution can provide peace of mind, but the fund argues it can also mean retirees unnecessarily restrict their lifestyle during the years when they may be most able to enjoy their money.
The issue is likely to become increasingly important.
Projections cited by Aware Super suggest median superannuation balances could more than double from about $200,000 in 2024 to almost $450,000 over the following decade, meaning future retirees could have considerably larger nest eggs to manage.
Aware Super’s modelling also relies on a series of assumptions about inflation, investment returns, fees and future retirement circumstances.
