A major report from the Super Members Council dispels a persistent myth that most Australian retirees are underspending their super, reviewing more recent data on retiree super behaviour patterns and finding that drawdowns from super are now typically higher than the minimum amounts required.
In 2024–25, around 68% of tax-free retirement account holders withdrew above the minimum, with this proportion even higher for those with less than $50,000 in super (81%).
Withdrawal rates vary with age. Super drawdown rates are highest for retirees aged 65-69 across both working life super accounts and retirement super accounts, falling as retirees enter their 70s, but rising again in their 80s driven by higher aged-based minimums and increased health and aged care costs.
The myth about underspending also distracts from the real issue – the sheer complexity of the retirement transition is causing decision paralysis for many pre-retirees which can cost them financially.
The report finds a typical new retiree with super could miss out on as much as $136,000 (or $6,500 a year) over the course of their retirement due to the daunting complexity of Australia’s retirement system.
Australia’s population is ageing. The recently released Population Statement forecasts that by 2065–66, there will be 1.9 million people 85 and over, up from 580,000 today.
A ‘silver tsunami’ of 2.8 million Australians is now racing towards retirement in the coming decade. This demographic influx will double the number of Australians retiring each year from 150,000 to 300,000.
And the amount of money these retirees will have in super by age 65 will almost double, too, rising from around $750 billion over the past decade, to almost $1.5 trillion over the next.
The Council is proposing reforms to simplify the transition to retirement and prepare the system for the coming silver tsunami, including automatically making accounts tax-free at age 65 for eligible members.
Around 700,000 Australians over 65 (and not working full-time) are keeping their super in a savings-phase super account, which is taxed. These Australians are paying on average $650 more in tax per year than if they transitioned to a tax-free retirement account within super.
While some retirees may have good reason to remain in a savings-phase super account, for many it is simply being unsure about what to do that keeps them in a taxed account.
The Council also proposes a review and adjustment of minimum drawdown requirements for retirees with low account balances and exploring strategies to encourage drawdowns above the minimum across varying balance levels.
Some Australians with modest super balances are discouraged from entering the retirement phase due to mandatory drawdown rules, which don’t align with their financial needs.
“Retirees are not underspending their super. It’s time we retire that myth and focus on making retirement simpler, easier and more intuitive for everyday Australians,” says the Council’s CEO Misha Schubert.
“The race is on to get ahead of the coming silver tsunami of retirees. A simpler, smarter pathway to retirement will help more Australians retire with confidence and the certainty they can pay for things they need.”
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The opinions above are those of the author in their capacity as spokesperson for Super Members Council of Australia (SMC). SMC, the authors and all other persons involved in the preparation of this information are thereby not giving legal, financial or professional advice for individual persons or organisations.
