The research uses recent data on retiree super behaviour to dispel the persistent myth that most Australian retirees are underspending their super.
It revealed that in 2024–25, around 68 per cent 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 per cent).
The report found that 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 analysis showed that the myth about underspending also distracts from the real issue which is that the complexity of the retirement transition is causing decision paralysis for many pre-retirees which can cost them financially.
It found that 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.
As Australia’s population ages it is estimated that by 2065–66, there will be 1.9 million people 85 and over, up from 580,000 today. There are currently 2.8 million Australians moving towards retirement in the coming decade which will double the number of people retiring each year from 150,000 to 300,000.
Consequently, the amount of money these retirees will have in super by age 65 will almost double, rising from around $750 billion over the past decade, to almost $1.5 trillion over the next.
The SMC is proposing reforms to simplify the transition to retirement and prepare the system for the influx of new retirees, including automatically making accounts tax-free at age 65 for eligible members.
It stated that around 700,000 Australians over 65 (and not working full-time) are keeping their super in a savings-phase super account, which is taxed, and are paying on average $650 more in tax per year than if they transitioned to a tax-free retirement account within super.
The council noted that while some retirees may have good reason to remain in a savings-phase super account, for many it is about being unsure about what to do that keeps them in a taxed account.
The SMC 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.
It stated that 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.
Misha Schubert, CEO of the SMC said retirees are not underspending their super and it is time to focus on making retirement simpler, easier and more intuitive.
“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,” she said.
