Banish the fear of running out in retirement

Many children are afraid of the dark, a fear most of us leave behind as we grow older. We outgrow it not because the dark changes, but because we learn to understand what it truly is: the fear of the unknown. This same dynamic applies to many adult fears, including Australia’s widespread anxiety about running out of money in retirement. It’s less about concrete evidence that we’ll run out, and more about the uncertainty and lack of understanding around what retirement will actually look like.

By providing the right advice and products, we can help clients better understand how they'll fund their retirement. Together, we can banish these fears, ensuring retirees enjoy their later years rather than living too cautiously, afraid to draw down on their savings.

Nearly half of Australians worry they won’t have enough money for retirement. This fear of running out (FORO) is the most common anxiety faced by retirees and significantly impacts their quality of life, especially in the early years when they have more energy and opportunities to enjoy themselves.

Yet, the reality is often much less dire. According to the Retirement Income Review, the typical Australian retiree dies with around 90% of their starting super balance intact. While this might sound positive, it actually suggests that many retirees are living far too frugally, afraid of running out, they end up denying themselves the joys and experiences they’ve worked so hard for. After a lifetime of saving, too many retirees are stuck in a ‘lifestyle deficit’, missing out on simple pleasures like a meal out, a holiday, or a long-dreamed-of hobby. Alternatively, FORO may cause them to miss other more significant opportunities, such as retiring years earlier, or assisting children to enter the property market.

Why education matters, especially early on

Our latest AMP research, surveying more than 2000 Australians, shows just how widespread financial insecurity is, and how early, ongoing education can help banish these fears. Half of all Australians don’t feel financially confident about retirement. The uncertainty is especially acute among women (59%), single parents, and those aged 40–49, sometimes called the 'sandwich generation'. In fact:

• Generation X single mums face an 81% confidence crash: More than four in five single mothers aged 40–49 say they are unprepared for retirement, the highest stress point across all demographics.
• Divorce doubles the retirement anxiety index: 69% of separated mums and 67% of separated women overall lack retirement confidence - compared to only 45% of partnered Australians.
• Couples enjoy a 24-point confidence dividend: Only 45% of partnered Australians lack retirement confidence, versus 69% of separated mums, a 24-point gulf.
• The 'sandwich generation' feels Australia’s heaviest retirement burden: 62% of 40–49-year-olds, and 75% of carers in this group suffer financial stress, with 70% adjusting their retirement plans.

What’s clear is that confidence is lowest in the years when people are juggling the most: mortgages, kids, ageing parents, and work. For single parents and separated women, the challenge is even greater, with up to 81% of single mums in their 40s feeling unprepared. 

The good news is that education makes a difference, especially when it starts early. Among Australians aged 20–39, confidence is already low (51%), but those who seek advice and learn about retirement options earlier are less likely to fall into a ‘lifestyle deficit’ later. Empowering people with knowledge, clear guidance and access to the right products from a younger age helps reduce anxiety, builds confidence and sets the stage for a more enjoyable retirement.

Dispelling retirement myths

Misconceptions about retirement spending also fuel anxiety. Many assume spending spikes early in retirement, dips in the middle, and soars later due to health costs. Research by David Blanchett and the Treasury, however, shows that spending tends to fall or remain flat as people age, primarily due to changing preferences due to aging, not budget constraints.

The crucial role of financial advice

With so much uncertainty and so many Australians lacking confidence about their retirement, the value of quality financial advice has never been more important. Trusted advisers have a unique ability to cut through the noise, provide clarity, and tailor solutions to individual circumstances. Through education, coaching and clear planning, advisers help clients feel empowered to make the most of their retirement savings rather than living in fear of the unknown.

Advisers are also at the forefront of retirement planning innovation. Many are now adopting new retirement income streams, like our MyNorth Lifetime accounts, which not only provide income for life but also deliver flexibility, concessional means testing for the Age Pension, and the ability to start planning earlier. These solutions are already making a real difference for clients who might otherwise be too anxious to enjoy their retirement, with the average MyNorth Lifetime member spending about 60% more than other MyNorth members.

However, for real impact, we need broader industry adoption of these innovative approaches. By working together as an industry to promote and deliver better retirement advice and products, we can collectively ease the fears of Australians approaching and living in retirement. The more advisers who are equipped with the latest tools and knowledge, the more Australians will have the confidence to spend, enjoy, and live the retirement they deserve.

Ultimately, the fear of running out is much like a fear of the dark: it’s not the dark itself, but what we imagine might be hiding there. With the right guidance and education, starting early, advisers can shine a light on these fears, helping clients see that what they were afraid of simply isn’t there. While innovative products like IRIS can help alleviate retirement anxiety, understanding how retirement funding works, and building that knowledge early, removes the fear altogether.

Learn more about North, the leaders in retirement innovation.