After decades of saving for retirement, many Australians face an unexpected challenge: giving themselves permission to spend their money.
Imagine reaching retirement with a healthy superannuation balance, a list of places you'd love to visit and more free time than you've had in years.
Yet instead of booking that holiday or enjoying the lifestyle you've worked towards, you find yourself worrying about spending too much.
Sound familiar?
For many Australians, the challenge of retirement isn't simply having enough money. It's knowing how much they can comfortably spend without putting their financial future at risk.
Research from the Grattan Institute suggests this is a common dilemma.
Its January 2025 report, Simpler super: Taking the stress out of retirement, found that many Australians are reluctant to draw down their retirement savings, even when they may have the financial capacity to spend more.
So, are we being too cautious with our superannuation? And how can we find the right balance between enjoying retirement today and maintaining financial security for tomorrow?
Here are three important things to consider.
1. The Minimum Pension Withdrawal Isn't a Spending Target
When you start an account-based pension, the government requires you to withdraw a minimum percentage of your account balance each financial year.
For the 2026–27 financial year, the minimum annual withdrawal rates include:
Under 65: 4%
Ages 65–74: 5%
Ages 75–79: 6%
Ages 80–84: 7%
The minimum percentage continues to increase with age.
For example, if you're aged 67 and have $600,000 in an account-based pension at 1 July, your minimum annual withdrawal would generally be $30,000.
But here's something important to remember.
The minimum pension withdrawal is a legal requirement, not a recommendation about how much you should spend in retirement.
You can generally withdraw more than the minimum from a standard retirement-phase account-based pension, although different restrictions apply to some other types of income streams.
And withdrawing money doesn't necessarily mean spending it. You might transfer some of your pension payments into a bank account or other investments outside superannuation.
Interestingly, the Grattan Institute found that approximately half of retirees using account-based pensions withdraw only the legislated minimum.
Its modelling suggests that consistently following these minimum withdrawal rates could leave around 65% of a retiree's superannuation balance unspent by average life expectancy.
That's a substantial amount of retirement savings potentially remaining unused.
Of course, there may be good reasons for this.
Some retirees want to leave an inheritance. Others have additional income sources or are deliberately preserving funds for future expenses.
But for some people, the decision to spend less may be driven by uncertainty about how long their money needs to last.
And that's understandable. Nobody wants to run out of savings in their later years.
The key is to remember that the minimum withdrawal isn't necessarily the right withdrawal amount for you. What matters is understanding your financial position and what level of spending may be sustainable throughout retirement.
2. Retirement Savings Are There to Support Your Retirement Lifestyle
Think about how much time you've spent preparing for retirement.
Decades of working, saving, making super contributions and planning for the day when you finally have more freedom to enjoy life.
Then retirement arrives, and suddenly spending those savings can feel uncomfortable.
It's a little like saving your best bottle of wine for a special occasion, only to realise you've never found an occasion special enough to open it.
But retirement isn't just about preserving your savings. It's also about putting them to work to support the lifestyle you've been looking forward to.
And what you want from retirement may change over time.
Your early retirement years
For many people, the first years of retirement offer opportunities to travel, explore new interests, spend time with family or enjoy activities that were difficult to fit around work.
These experiences may involve additional spending, particularly while you're active and healthy.
Your later retirement years
As retirement progresses, your lifestyle and spending priorities may change.
You might travel less or spend more time closer to home.
However, other expenses can increase, including healthcare, home maintenance, assistance with daily living and potentially aged care.
This means retirement spending doesn't necessarily follow a straight line.
You may want to spend more on experiences in some years while keeping sufficient financial resources available for the future.
The challenge is finding a balance.
Spending too cautiously may mean missing opportunities that are important to you. But spending too much early in retirement can increase the risk of financial difficulties later, particularly if investment markets perform poorly.
A thoughtful retirement strategy should consider both sides of this equation: what you want to enjoy now and what you may need in the years ahead.
After all, retirement should be about more than simply watching your super balance.
3. Focus on Retirement Income, Not Just Your Super Balance
When people think about retirement, the conversation often starts with a number.
"Do I need $500,000 to retire?"
"Is $1 million enough?"
"How much super should I have by age 65?"
These are reasonable questions, but they don't necessarily tell the whole story.
A more useful question might be:
"How much income can my savings and other financial resources provide throughout retirement?"
Consider two retirees who each have $800,000 in superannuation.
One may own their home outright, have modest living expenses and qualify for a part Age Pension.
The other may have significant ongoing expenses, additional financial commitments or different retirement lifestyle expectations.
Despite having identical super balances, their retirement income needs could be very different.
This is why retirement planning is about more than reaching a particular savings target.
It's about understanding how your income sources, expenses and investments work together over time.
Could a more predictable income help?
One issue highlighted by the Grattan Institute is the uncertainty retirees face when managing account-based pensions.
While these pensions provide flexibility, investment returns can fluctuate, and your income isn't guaranteed to last for life.
Other retirement income products, such as lifetime annuities, are designed to provide regular payments for as long as you live, subject to the product's terms.
The Grattan Institute suggested that greater access to lifetime income products could help retirees feel more confident about spending their savings.
Among its recommendations was a proposal for the government to offer a lifetime annuity, with retirees encouraged to allocate 80% of the portion of their super balance above $250,000 towards it.
This was a voluntary policy proposal, not an existing requirement.
Of course, lifetime income products aren't suitable for everyone.
Depending on the product, they may provide less flexibility to access capital and may have different arrangements for inflation protection and payments to beneficiaries.
However, the research highlights an important point.
Having greater certainty about your future income may make it easier to feel confident about what you can afford to spend today.
For some retirees, that might involve combining an account-based pension with the Age Pension.
For others, a broader retirement income strategy might include lifetime income products, rental income or other investments.
The aim is to create an income strategy that supports your lifestyle while managing the risks that come with retirement.
Retirement Is About More Than Having Money in the Bank
A successful retirement isn't necessarily measured by how much money you have left at the end.
It's about whether your financial resources have helped you enjoy the retirement you wanted, while providing the security you needed along the way.
For some people, leaving a substantial inheritance is an important goal. For others, travelling, spending time with family or pursuing lifelong interests may be higher priorities.
Neither approach is inherently right or wrong.
What matters is making informed choices rather than allowing uncertainty to make those decisions for you.
If you're approaching retirement or already retired, it may be worth asking yourself:
Am I comfortable with my current retirement spending?
Do I know how much income my savings could reasonably provide?
Have I allowed for future expenses, including healthcare and aged care?
Am I holding back on experiences I could potentially afford?
Does my retirement income strategy still reflect what matters most to me?
A financial adviser can help you explore these questions, assess different spending scenarios and understand the potential impact of your decisions on your long-term financial security.
Because retirement isn't just about having enough money to last. It's about making the most of the years you've worked so hard to enjoy.
And sometimes, that means giving yourself the confidence to spend.
Research and important information
This article references the Grattan Institute report Simpler super: Taking the stress out of retirement, published on 19 January 2025.
The estimate that 65% of superannuation balances could remain unspent at average life expectancy is based on Grattan Institute modelling of minimum pension withdrawals. It is not a prediction of individual outcomes.
The proposed government lifetime annuity is a policy recommendation rather than an existing compulsory arrangement.
Minimum account-based pension withdrawal rates quoted are for the 2026–27 financial year. Actual minimum payments depend on the relevant account balance, age and commencement date. Different rules may apply to certain income streams.
General Advice Disclaimer
This article contains general information only and does not take into account your personal objectives, financial situation or needs. Before acting on this information, consider whether it is appropriate for your circumstances and consider obtaining personal financial advice from a suitably qualified financial adviser.
If considering a financial product, obtain and consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD), where applicable, before making a decision. Information is current as at November 2026 and may change.