Retirement requires a fundamental shift – to our lifestyles, finances, and mindset. After a lifetime of saving, we shift to decades of spending. This is a change that doesn’t come naturally for many of us. As we live longer, with retirement now spanning thirty years for the average Australian, knowing how much money we will need to fund our post-work years has become a mounting challenge.

With 250,000 Australians stepping into retirement every year, it is imperative to understand how spending expectations of Australians change as they approach and enter retirement. To do so, I partnered with retirement income provider, Challenger, to survey more than 1,000 Australians aged 60 to 80 with superannuation balances over $100,000.

While a third of retirees (34%) were able to confidently predict their spending in the next one to two years, this figure fell to just 1 in 10 (11%) when asked to predict over the next decade. Concerningly, 14% of retirees and 19% of pre-retirees had no idea about future spending over any time horizon.

Fears were more pronounced for pre-retirees, with uncertainty over the future leading to concerns that money would run out (46% pre-retirees v 21% retirees), worries about unexpected health and aged care costs (45% pre-retirees v 26% retirees), and concerns about having enough money for daily living expenses (30% pre-retirees v 12% retirees).

Retirement is a significant stage of life that can last for decades. Understanding our spending habits is critical to informing how much retirement savings we will need.

It has been said for many years that retirees are under-spending to leave an inheritance for their children. Our research found this to very much be an oversimplification. For many, they underspend as they worry they may have no savings left when they get older.

Ultimately, the research revealed that spending came down not to your superannuation balance or the value of your home, but to your retirement mindset. We need to give more Australians the confidence to enjoy retirement.

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