A SMC report has found most retirees draw above minimum rates, contrary to popular belief that retirees are underspending.
A major report from the Super Members Council has dispelled the persistent myth that most Australian retirees are underspending their super, finding drawdowns are now typically higher than required minimums.
The council’s analysis of recent data on retiree behaviour shows that in 2024–25 around 68 per cent of tax-free retirement account holders withdrew above the minimum, with the proportion even higher among those with less than $50,000 in super at 81 per cent.
Withdrawal patterns also vary by age. The report finds drawdown rates are highest for retirees aged 65–69 across both working-life and retirement super accounts, fall as retirees move through their 70s, then rise again in their 80s, driven by higher age-based minimums and increased health and aged care costs.
The council argues the underspending narrative distracts from a more pressing issue: the complexity of the retirement transition is causing decision paralysis for many pre-retirees, which can be costly.
It estimates a typical new retiree with super could miss out on as much as $136,000, or $6,500 a year, over the course of retirement because Australia’s system is daunting to navigate.
The findings come as Australia’s population ages rapidly with the Population Statement forecasting that by 2065–66 there will be 1.9 million people aged 85 and over, up from 580,000 today.
A “silver tsunami” of 2.8 million Australians is now racing towards retirement over the next decade, doubling the number of people retiring each year from 150,000 to 300,000.
At the same time, the amount of money retirees will hold in super by age 65 is projected to almost double, rising from around $750 billion over the past decade to nearly $1.5 trillion over the next.
To prepare the system, the council is proposing reforms to simplify the transition to retirement, including automatically making accounts tax-free at age 65 for eligible members.
It estimates around 700,000 Australians over 65 and not working full-time are keeping their super in taxed savings-phase accounts, paying on average $650 more in tax per year than if they moved to a tax-free retirement account.
While some may have good reasons to remain in savings phase, the council says for many it is uncertainty that keeps them in taxed accounts.
Further proposals include reviewing minimum drawdown requirements for retirees with low balances and exploring ways to encourage drawdowns above the minimum across different balance levels, noting some Australians with modest super are discouraged from entering the retirement phase because mandatory rules do not align with their 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 chief executive 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.”
