A retiree sits on a comfortable balance, takes only the minimum drawdown from an account-based pension, and frets about money anyway. Ask why they don't spend more and the answer comes back in the language of caution. What if I live longer than expected? What if the market turns? What if I need care? The fear is understandable. The odd thing is how often it persists in people who, on any sober reckoning, have more than enough.
What the rules can explain
In Australia, some of that caution is rational, and it traces straight back to the Age Pension. The pension is means-tested. For many asset-tested part-pensioners the binding constraint is the assets test, which reduces the payment by three dollars a fortnight for every thousand dollars of assessable assets above the threshold, though Centrelink also applies an income test and pays whichever produces the lower amount. Run those assets down and the pension rises to fill part of the gap. So the system, perversely, nudges those retirees toward spending rather than holding on. Yet the deeper instinct to preserve the balance does not bend to that arithmetic, and from inside the Australian system the rational and the instinctive are often difficult to disentangle.
By comparison, New Zealand lets you pull them apart.
Across the Tasman, the state pension works in a completely different way. Called NZ Super, it is universal. It is paid at a flat rate to almost everyone over 65, regardless of income, savings, or the value of the home. There is no asset test and no income test. A retired millionaire and a retiree with nothing receive the same fortnightly payment, and whatever you draw from your own savings has no effect on it at all.
That design strips out the one part of the puzzle that policy can explain. In New Zealand there is no means test to respond to, rationally or otherwise. If means-testing was the real driver of underspending, New Zealanders, free of it, should spend their savings more readily than Australians.
They don't.
What the rules cannot explain
New Zealanders who reach retirement with money behind them are still strikingly reluctant to touch it, and the country's Retirement Commission has put numbers to the spending aversion. Its Older People's Voices research, surveying more than 1,400 people aged 65 and over, found the bulk of older people with assets were still reluctant to crack open the nest egg. Most chose to spend only the returns or to keep growing their investments, and only one in ten drew a regular income from their savings at all. The Commission's own diagnosis was that people struggle to make the shift from a saving mindset to a spending one.
A fair objection is that New Zealand has its own quirks. Housing dominates household wealth there, as it does in Australia, and the wish to leave something for the children is just as common. Neither explains the pattern away, because each has a close Australian counterpart. What New Zealand removes, and Australia cannot, is the means test. Take that away and the reluctance remains. The New Zealand evidence does not prove the case on its own, but it strongly suggests the hesitation runs deeper than any pension rule.
Think about what society asks of a good saver. For decades they delay gratification. The dutiful saver watches a balance grow and learns, correctly, to avoid spending it down. Every year of working life rewards the instinct to add to retirement savings, not subtract. The discipline carrying someone safely to retirement is built entirely around not spending. Then, on a single notional day, we expect them to reverse the habit of a lifetime and start drawing the money down. The muscle that built the balance is the one we now ask them to relax, and it does not relax on command.
What the Australian numbers do and don't say
How big is the Australian version of this? The honest answer is that the figure is contested, and it pays to be precise about why. Treasury and the researchers measuring total wealth are counting one thing; super funds discussing account balances are counting another. Treasury's Retirement Income Review in 2020 found most people die with the bulk of the wealth they had at retirement still intact, and that most drew their superannuation at close to the minimum rate. A separate 2017 study by Asher and colleagues, later cited by the Grattan Institute, found the median pensioner died still holding around 90% of the wealth with which they were first observed. Super fund bodies push back, noting that most people have little super left late in life.
Both pictures can be true. Super balances naturally run down with age, while total net worth, dominated by the family home and other assets, is preserved or even grows. Measure super alone and you see depletion. Measure the whole balance sheet and you see wealth retained rather than spent.
The legislated minimum drawdown does not help, because it is widely misread. For a retiree aged 65 to 74 the minimum is 5% of the account balance a year, rising with age. Many treat the figure as a recommended income. It is nothing of the kind. It is a floor, the least you must withdraw to keep the account's tax concessions, set to stop super being used purely as a shelter. Drawing the minimum and no more is not a spending plan. For many it is a way of not spending while staying inside the rules.
None of this dismisses the fears driving the caution. People do not know how long they will live, what their health will cost, or what markets will do in the years they most depend on them. Wanting to leave something for children, especially children facing their own housing pressures, is a decent impulse rather than a mistake. Some retirees do draw down with confidence, usually those with a lifetime annuity or a clear spending rule that gives them permission. They are the exception. For most, the response to uncertainty is to freeze, and the freeze tends to outrun the actual risk by a wide margin.
What does this mean for someone near the end of their working life? Mostly, it means seeing the reluctance for the habit it is. The instinct that built your retirement is a poor guide to enjoying it. Saving and spending pull on opposite muscles, and the discipline you trained for decades will quietly resist being switched off. It is not a verdict on what you can afford. The hard part of retirement was never building the money. It is giving yourself permission to spend it.
Joseph Darby is a financial adviser and chief executive of Become Wealth, a New Zealand financial advisory and investment management firm. The views expressed are the author’s own. Nothing in this article constitutes personalised tax or financial advice.