For years, Australians have been told a simple story about retirement: retirees are too cautious, they're not spending their superannuation, and they're leaving behind large nest eggs when they die. The solution, we're told, is to encourage people to draw down their savings faster or to invest in products such as annuities and retirement income products.
The problem is that this narrative rests heavily on a statistic that deserves far more scrutiny than it receives.
A Treasury Retirement Income Review found that members of one large superannuation fund died with around 90% of the superannuation balance they held at retirement. That finding has since been repeatedly cited as evidence that retirees are underspending their savings and need help overcoming their reluctance to spend.
But there is a crucial catch. It's not true.
The review's finding was based on data from a single, unidentified, large super fund. Critics have long questioned whether the fund's membership was representative of the broader Australian population, particularly given that large balances are often concentrated among a relatively small segment of retirees.
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The real truth
When we look at the retirement savings of ordinary Australians, a very different picture emerges.
The latest available age-based superannuation statistics show that the median super balance for Australians aged 65 to 69 is around $195,000. In other words, half of Australians entering retirement have less than this amount. Even for those aged 60 to 64, the median balance is only around $201,000.
These are not balances that allow people to live a lavish retirement, especially as living costs skyrocket.
Nor are they balances that make it easy to absorb the growing financial risks that come with ageing.
Older Australians are increasingly expected to fund private health insurance, out-of-pocket healthcare costs, dental expenses, home modifications, assistive technologies, residential aged care contributions, and in-home care services.
While the Age Pension provides an essential safety net, many retirees understand that their superannuation may need to last decades and help cover expenses that are difficult to predict. The fear of running out of money is not irrational. It reflects the reality of longer life expectancy and rising care costs.
Yet policy debates continue to focus on ways to encourage retirees to spend more as if we are all multi-millionaires - good luck to you if you are!
Successive governments and regulators have promoted the development of retirement income products on the basis that retirees are holding onto too much of their super. The assumption is that most people could enjoy a higher standard of living if they drew down their savings more quickly.
That may be true for retirees with very large account balances.
It is far less convincing for everyday Australians.
For many retirees, superannuation is not a vehicle for intergenerational wealth transfer. It is a contingency fund. It represents protection against ill health, aged care costs, the loss of a partner, housing repairs and the simple uncertainty of not knowing whether retirement will last 10 years or 30.
Research challenging Treasury's conclusions found that many retirees do in fact draw down their super significantly over time, with balances often reduced substantially or exhausted altogether as people age - caravan anyone?
Association of Superannuation Funds of Australia (ASFA) analysis argued that some studies contained survivorship bias, overstating the extent to which retirees retain their savings because they focused on those still alive and still holding superannuation assets.
This matters because policy narratives shape policy responses.
If governments assume Australians are retiring with large balances and dying wealthy, the focus naturally turns to spending more. If the reality is that most retirees have relatively modest savings and legitimate concerns about future health and aged care costs, then the priority should be helping people build and protect their retirement savings rather than encouraging them to spend them faster.
The real story is not that retirees are hoarding riches.
The real story is that most Australians enter retirement with modest superannuation balances and face considerable uncertainty about the costs that lie ahead.
Until that reality is acknowledged, the claim that retirees are dying with 90 per cent of their super may remain what it has become in Australian retirement policy - a lie that is only serving those who want to separate retirees from their hard-earned savings.
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