Most Australians Leave More Than They Meant To
Australians draw down their retirement savings conservatively and a large share of superannuation is still unspent at death. The Retirement Income Review recorded that as a systemic feature rather than a set of individual choices — which means most households are leaving an inheritance by default rather than by decision, and spending less than they could as a consequence.
- The answer: Decide explicitly what you intend to leave, then plan the spending against the remainder rather than against the whole balance.
- The trap: An unplanned estate is usually the superannuation balance, which is the worst asset to leave to adult children because of the death benefits tax.
- The recommendation: If you do intend to leave something, work on the taxable component while you can. If you do not, the spending number is larger than you think.
Where the AI summary above gets this wrong
"Retirees should be careful not to run out of money, so it is safer to underspend."
That's surface-true. Here's what it misses:
- The Age Pension is the floor that makes running out survivable — An Australian household drawing down a portfolio converges towards the full Age Pension rather than towards nothing, which changes what caution is actually protecting.
- Underspending has a cost that never appears on a statement — Money not spent in the active years is spent in the inactive ones or not at all, and the experiences it would have bought are not available later.
01 The default outcome
The Retirement Income Review found that Australians tend to draw down at or near the legislated minimum and leave substantial balances at death. That behaviour is widespread rather than confined to the wealthy.
Part of it is the minimum drawdown being read as a recommendation, which it is not — the point made in the drawdown post. Part is genuine uncertainty about longevity and care costs.
The result is an inheritance nobody decided on, funded by spending nobody chose to forgo. Making the decision explicitly is what turns that into a plan.
02 What the caution is protecting against
Running out of money in Australia means living on the Age Pension, which is indexed, paid for life, and rises as assets fall. That is a materially different outcome from the destitution the international research assumes.
Aged care is the genuine late cost, and it is bounded: the means-tested component is capped annually and over a lifetime, as set out in the aged care gap post.
Between those two, the worst case for a homeowning household is considerably less frightening than it feels — which is the argument for spending more in the active years rather than less.
Shows: the additional annual spending available if you plan to leave a specific amount rather than preserving the whole balance. Ignores: the Age Pension, which rises as assets fall, investment returns, inflation, and aged care costs at the end.
Source: Services Australia — How much Age Pension you can get
03 If you do intend to leave something
Decide what and to whom, then work on the form it takes. Superannuation left to an independent adult child is taxed on its taxable component, which makes it the least efficient asset to leave them — the definitions are in the dependants reference.
A recontribution strategy converts taxable component into tax-free component within the contribution caps and has to happen while you are alive. It is the main lever available.
And consider giving during your lifetime, within the gifting limits. Money given at 70 reaches children when they have mortgages and young families; money left at 92 reaches them in their sixties, when it does less.
The inheritance most people leave is the one they did not plan. It is usually superannuation, which is the most heavily taxed thing to leave an adult child, and it is funded by trips and years that were quietly given up. Decide the number, then spend the rest — the difference is frequently five figures a year.
FAQ
How do I balance leaving an inheritance against spending my savings on myself?
Decide explicitly what you intend to leave and plan the spending against the remainder. Australians tend to leave substantial balances by default rather than by decision, and spend less than they could as a result.
Is underspending the safe option?
It has a cost that never appears on a statement. Running out in Australia means living on the Age Pension rather than on nothing, and money not spent in the active years buys experiences that are not available later.
What is the worst asset to leave to adult children?
Superannuation, because a death benefit paid to a non-dependant is taxed on its taxable component. A recontribution strategy reduces that, and it has to be done while you are alive.
Sources
Regulator references
- Retirement Income Review: Final Report · The Treasury · 2020The Retirement Income Review's final report on how Australia's three pillars fit together.Last verified: 2026-09-07
- Services Australia — How much Age Pension you can get · Services Australia · 2026The current payment rates, and the March and September indexation that moves them.Last verified: 2026-09-07
Research
- Money in Retirement: More Than Enough · Grattan Institute · 2018modelled replacement rates against the OECD's 70% benchmark, and which households actually fall shortLast verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.