Reviewing more recent data, the SMC has found that retiree drawdowns on super are now typically higher than the minimum amounts required.
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).
“Withdrawal rates vary with age,” the SMC said.
“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.”
SMC also highlighted that the myth about underspending also distracts from what they call the “real issue” – that the complexity of the retirement transition is causing decision paralysis for many pre-retirees, which can cost them in the long run.
The report found that a new retiree with super could be missing out on as much as $136,000 over the course of their retirement due to the complexity of the system. That is $65,000 a year of unrealised retirement income.
“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,” said SMC CEO Misha Schubert.
Against that backdrop, the council also warned the retirement system is not yet equipped to handle the scale or speed of the demographic shift now under way. It highlighted that Australia’s population is ageing rapidly, with the latest Population Statement forecasting 1.9 million people aged 85 and over by 2065–66, up from around 580,000 today.
Over the next decade alone, what the SMC calls a “silver tsunami” of 2.8 million Australians is expected to reach retirement age, doubling the number of people retiring each year from roughly 150,000 to 300,000.
At the same time, the pool of superannuation savings held by new retirees is set to almost double, rising from about $750 billion accumulated over the past decade to nearly $1.5 trillion over the next.
The council argued that without reform, growing complexity at the point of retirement risks undermining the benefits of higher balances. It is proposing a package of changes aimed at simplifying the transition, including automatically moving eligible members’ accounts into the tax-free retirement phase at age 65.
Currently, around 700,000 Australians aged over 65 and not working full-time are keeping their super in savings-phase accounts, which are subject to tax. On average, they are paying about $650 more in tax each year than if they had transitioned to a retirement account.
While some may have legitimate reasons for staying put, the council said uncertainty and confusion are often the real barriers.
It is also called for a review of minimum drawdown requirements for retirees with low balances and for strategies that encourage appropriate drawdowns across different balance levels, noting that rigid rules can deter those with modest savings from entering retirement phase at all.
“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,” Schubert said.
