In 2024, the market and social researcher Susan Bell released an eBook, Spending and Saving in Retirement. The New Lives of Older Australians, in which she described the ‘Five Blame the Retiree’ narratives impeding the retirement industry’s progress in meeting the requirements of the Retirement Income Covenant. In this second blog post for Optimum Pensions, Susan explains why these five narratives should be avoided.
The five narratives that I describe below each have a grain of truth. They are not wrong as such. They are not ‘myths’. Rather, by focussing on the things that are wrong with retirees or that retirees do wrongly, these narratives effectively let the industry off the hook, which leads to strategic inaction.
Susan Bell, Founder and Lead Researcher at Retiree Insights Australia.
The Frugality Narrative
The frugality narrative is based on the belief that retirees are being deliberately frugal so that they can pass their superannuation savings onto their children. Advocates cite two pieces of evidence – first, that some retirees have left large legacies to their children from unspent superannuation, and second, that many retirees only draw down the minimum from their decumulation accounts.
The problem is that there are many reasons why retirees only withdraw the minimum. Leaving a legacy is only one of those. The other reasons include worrying how long their money will last, having other sources of income available, and having limited spending needs.
For example, some couples who each take the minimum drawdown from their superannuation end up with more than they need for that month, so they put the excess into the bank. Some retirees tell us that they do not need to spend more than they are actually spending; they have all they need.
Conclusion: blaming retirees for over-indulging their children draws attention away from other explanations for their behaviour.
The Low Financial Literacy Narrative
According to the low financial literacy narrative, retirees make poor financial decisions because they lack financial knowledge. This can lead stakeholders to conclude that giving retirees more financial information is the answer.
Unfortunately, the industry tends to communicate to members using technical, financial terminology that their audience is unfamiliar with. This looks more like a communication impasse than a literacy problem.
Conclusion: blaming retirees for lacking financial knowledge places the onus for improving the retirement system on superannuation members rather than on the funds to communicate with members using words and concepts they already understand.
The Disengaged Narrative
This narrative says that retirees have disengaged from superannuation because of the complexity of retirement products.
True in some cases? Yes, but be careful how you define ‘disengaged’. For example, an inactive superannuation account is not in itself evidence of disengagement. The member may have another account or other income.
Conclusion: avoid blaming retirees for disengaging until there is better evidence of disengagement.
The Doom Narrative
The doom narrative is a different kind of narrative. It is usually aimed at older workers, telling them they are not saving enough, so they will end up in poverty in retirement.
Given that superannuation balances are a function of income, this doom narrative is, at best, unhelpful. It is a fact that people on lower incomes tend to have lower balances.
The doom narrative is also potentially damaging. Our research has shown that some people stay at work longer—and in some cases in stressful jobs—because they believe this narrative, thinking that they need to accumulate more and more and more.
Conclusion: avoid the doom narrative. It may be causing undue stress.
The Deficit Narrative
The deficit narrative is a way of talking to, and about older people that emphasises the things that are wrong with them, or about to go wrong with them—like impending heart attacks or dementia.
The deficit narrative frames retirement as ageing. In turn this leads to the idea that people of retirement age should be saving for health and aged care. In contrast, our research shows that new retirees are not thinking about their own aged care; they are worrying about how to care for their parents.
Conclusion: avoid the deficit narrative. It frames retirees of any age as old and incapable and focuses on retirement as a time to save for aged care and health care costs when retirement is so much more than that.
What To Do Instead
Each of these narratives takes a too narrow view of human behaviour, focusing on financial considerations to the exclusion of all else. In the eBook, I describe an alternative: the Resources Model of Wellbeing in retirementi.
According to this model, individuals will be happy and content in retirement if they have what the authors term ‘resources’—in that they
- Are in good financial shape,
- Are in good health
- Have strong social connections like family and friends, and
- Have emotional resources such as coping skills, good cognitive resources and a sense of purpose or meaning in life.
This is in stark contrast to the idea that having enough money in retirement to spend on themselves—and not leave to their children—should be the ultimate aim of the system.
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Read previous guest blog by Susan Bell | Understanding the Retiree Mindset >>>
Download the free eBook Spending and Saving in Retirement – The New Lives of Older Australians