As featured in The Australian Financial Review, this research report set out to better understand the psychology behind retirement decisions and outcomes.
For many Australians, retirement is the reward for decades of hard work, saving and planning. Yet once retirement begins, a new challenge emerges: knowing how much to spend.
While accumulating retirement savings is a familiar goal, spending those savings confidently can be much harder. Many retirees grapple with the same question: How can I enjoy retirement today while making sure my money lasts for tomorrow?
New research from the Institute for Lifetime Income suggests that this balancing act is one of the defining challenges of modern retirement. The good news is that most retirees are finding a way forward, with confidence playing a critical role in how they approach spending decisions.
A common assumption is that spending naturally falls once people stop working. The reality is more complex.
The research found that almost 80% of retirees change their spending after retirement, but those changes aren't all in the same direction. Around one-quarter of retirees reported spending more than before retirement, while more than one-third reported spending less. Another 37% said they were spending about the same amount.
For some retirees, retirement creates opportunities to spend more on travel, hobbies, family experiences and personal goals they've postponed during their working years. Others discover that a simpler lifestyle suits them perfectly and naturally spend less.
The key takeaway is that there is no single ‘correct’ way to spend in retirement. Retirement looks different for everyone.
One of the strongest themes emerging from the research was uncertainty.
Even retirees who are financially comfortable often worry about future expenses, including:
These concerns can make retirees reluctant to spend money today, even when they have the resources to support their lifestyle.
The research identified a group of retirees described as "Cautious". These retirees often reduce spending not because they need to, but because they are worried about what the future might bring. Their concern isn't necessarily a lack of money. It's a lack of certainty.
This highlights an important reality: retirement spending decisions are often driven as much by confidence as by financial resources.
Part of the challenge is that retirement rarely unfolds exactly as expected.
The research found most retirees feel reasonably confident forecasting their spending over the next year or two. However, very few feel confident predicting what their spending will look like a decade into the future.
Health changes, family circumstances, inflation and lifestyle preferences can all evolve over time. Some retirees spend more in the early years of retirement when they are active and travelling. Others find spending increases later because of healthcare or support needs.
Because retirement is dynamic, spending plans need to be flexible.
Perhaps the most encouraging finding from the research is that most retirees are confident they can afford their desired lifestyle.
More than eight in ten retirees reported being fairly or very confident that they can maintain the lifestyle they want in retirement. Those with higher confidence were also more likely to continue spending in line with their goals and maintain their standard of living.
Importantly, confidence isn't determined solely by wealth.
While financial resources matter, access to information, guidance and advice can also help retirees feel more secure about their future. Understanding where income will come from, how spending may change over time and what options are available if circumstances change can all help reduce uncertainty.
In many cases, confidence provides retirees with something just as important as income: permission to enjoy retirement.
Spending confidently doesn't mean spending recklessly. Nor does it mean depriving yourself of experiences today out of fear about tomorrow.
The most successful retirees often strike a balance between the two.
They enjoy the opportunities retirement offers while maintaining a plan for future needs. They recognise that circumstances may change and build flexibility into their financial decisions. Most importantly, they align their spending with the lifestyle they want to live.
For some, that means taking the overseas holiday they have always dreamed about. For others, it means enjoying a simpler lifestyle with family, friends and local experiences. Both approaches can lead to successful retirement outcomes when they reflect personal goals and priorities.
Australians spend decades focused on building their retirement savings. Yet retirement success is ultimately determined by what those savings enable people to do.
The Institute for Lifetime Income research highlights that confidence is a critical part of that equation. People who feel confident about their financial future are more likely to enjoy the lifestyle they want and make decisions that support their wellbeing.
Retirement is not simply about having enough money. It is about having the confidence to use it.
Because while savings provide the means to retire, confidence provides the freedom to live well.
Read the full research: https://www.challenger.com.au/about-us/Institute-for-Lifetime-Income/four-ways-australians-navigate-retirement
Source: Four Ways Australians Navigate Retirement, Institute for Lifetime Income, August 2026.
