Why so many Aussies fear retirement, even with enough super

Many Australians delay retirement not because they lack money, but because they fear what comes next. The result is people working longer, underspending and dying with super left untouched.

I have friends who can't face retiring. It isn't because they don't have enough superannuation to live on.

They can't seem to get their heads around going from a busy life to an easy life.

They worry they will be bored or irrelevant without a job.

Why some Australians fear retirement

I understand 'retirement' is complex and deeply personal. It is a huge leap into the unknown.

Some people fear the end of employer payments.

They worry about running out of money because they don't know how long they are going to live, how much they will spend on their health as they age or whether they will need to pay for aged care.

Rollercoaster markets and high inflation keep them checking their superannuation balance constantly.

Some delay leaving work because they are worried about their struggling adult children.

Superannuation and retirement plans are being hijacked to help their 20- and 30-year-olds with housing and other living expenses. Nest eggs are likely pushing up house prices.

I know people in their late sixties and mid-seventies still working and deriding people who have retired. I understand.

Their work ethic is entrenched but I am surprised that they can't transfer it to other more nurturing activities. Or at least try working part-time.

Often these workaholics are exhausted, frustrated and angry about a heavy workload, a toxic workplace and younger people who may want them out the door.

I have one friend who went into an office where no-one spoke to him for the last couple of years before he was retrenched.

I advise these reluctant retirees not to die at their desk. Retirement is the time to spend what they have saved in their superannuation and other investments and have fun. Go slow instead of fast.

"If only I could afford to retire," one always says, but I know that he can. He loves decent holidays and lots of eating out. He has the means to retire in style and budget for these but somehow can't understand how it works.

Australians are dying rich 

People fear they will spend too much but the reality is that retirees underspend and end up dying with a significant balance 
of their superannuation unspent.

My parents worried obsessively about money in their old age and didn't understand that they could have comfortably spent more than they did.

People can be unlucky with their health. I know two people in the past year who were diagnosed with advanced cancer shortly after they retired.

They died in their first year of retirement. They never got to travel extensively, spend more time with grandchildren and pursue their passions. Their partners had been hanging out for their retirement years.

I realise that my friends don't have a plan to withdraw their savings after putting money away in superannuation for decades. 
It is important and straightforward to organise an income for retirement through an account-based pension.

It will keep earning a return, just as their superannuation did, and it is typically a lot more than bank account interest rates.

One strategy to acclimatise to retirement is to wind back your working hours and set up a transition-to-retirement (TTR) income stream once you reach 60 or older.

It allows you not to reduce your income but work less. You are taxed at 15% on your investment returns on your TTR, lower than your income. Your superannuation balance reduces but you can redirect more of your salary into your super fund to top it up if you want.

I realise that some of my friends have preferred to invest in property rather than superannuation.

While their properties have rocketed up in value, the income yield from their property - often eaten up in the cost of maintenance, land tax, vacancy periods when the tenant turns over - is low.

This means they keep working because their property income doesn't provide enough to live on, and they can't gradually liquidate a property.

What's more, they pay tax on the rental income because investments outside of superannuation are taxed.

Alternatively, once you reach age 60 and retire, you can start to withdraw your super as a tax-free income stream.

How to set up an income from your superannuation 

It goes like this: if a person has $1 million in superannuation and other investments across a range of asset classes, a conservative estimate of the return is 6%, so that before withdrawal, the assets would grow to $1,060,000 over a year.

If they draw down the minimum from their account-based pension of 4%, equivalent to $40,000, their balance would still increase to $1,020,000.

Unless they are drawing down more than their earnings, the asset base may slightly increase and so will the dollar amount of their 4% drawdown. This provides some offset to increases in the cost of living.

Superannuation funds have had strong returns over the past few years, with the median growth fund returning 10.5% for 2024-25 financial year after fees and tax, according to Chant West.

Over 10 years the median growth fund returned 7.2% per annum. One million dollars would have been yielding returns of $72,000 per annum so retirees would have a higher income than the conservative 4% rule.

On average, Australians retire with a lot less than $1 million: men aged 60 to 64 have $402,000 and women have a lot less with $300,300, according to Deloitte average balances. People qualify for a partial age pension with these balances and as their assets run down over the years, their age pension payment rises.

These retirees are bouncing on the safety net but still can achieve the Association of Superannuation Funds 
of Australia's (ASFA) modest living standard in retirement.

To get beyond the age pension, you may have to contribute to super via salary sacrifice, depending on how much you have in your fund.

Downsizing to boost super

One friend is considering downsizing to boost her super.

While it is called a downsizer payment, you can upscale your home and buy a bigger house in a different area that 
is cheaper. The aim is to unlock some funds that you can place into your superannuation to boost the balance.

If you've owned a principal home for 10 years or more, are 55 or older, you may be eligible to make a downsizer contribution of up to $300,000 per person, separately (up to $600,000 for a couple) from the sale of your home.

But do your research well as plenty of downsizers run into more expenses and headaches than they anticipated. You want to make sure it helps with retirement, rather than making you stay at work longer.

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