Retirement anxiety affects over 58% of people aged 40 and above, with a striking 70% increase in those feeling “very anxious” since 2022. For many, retirement represents a dream of leisure and fulfilment, yet the reality often includes significant stress and worry. Unfortunately, nearly half of all working adults feel financially unprepared for their golden years, with 68% concerned about outliving their savings.
Pre-retirement anxiety is undoubtedly more common than most people realise. In fact, 18% of adults report that their retirement worries are severe enough to keep them awake at night, while 13% have delayed their retirement plans altogether due to these concerns. Financial security remains the primary source of anxiety in retirement, as people wonder whether their money will last throughout their post-working life. However, retirement financial anxiety isn’t limited to monetary concerns—61% of workers also worry about losing valuable social connections when they leave the workplace. This practical guide offers straightforward approaches to tackle these challenges and develop a confident outlook for the future.
Related Article: Retirement Crisis Hits Australia: Women Face 40% Less Savings Than Men
Understand the Roots of Retirement Anxiety
The transition from work to retirement represents one of life’s most significant changes, often accompanied by complex psychological challenges. Understanding the roots of retirement anxiety requires looking beyond mere financial concerns to examine the profound emotional and identity shifts that occur during this life stage.
Pre-Retirement Anxiety
Pre-retirement anxiety develops as workers contemplate the challenges awaiting them after their careers end. Nearly half of all Australians worry that they won’t have enough money for retirement, while 60% expressed various levels of uncertainty about being financially prepared. This anxiety affects specific demographics particularly strongly, with 62% of 40-49 year-olds (often called the “sandwich generation”) feeling burdened by retirement concerns.
Women face significantly higher retirement anxiety, with 59% lacking confidence compared to men. The disparity becomes even more pronounced for single parents—a staggering 81% of single mothers aged 40-49 report feeling unprepared for retirement. Furthermore, separation or divorce dramatically increases anxiety levels, with 69% of separated mothers and 67% of separated women overall lacking retirement confidence.
Top Fears: Running out of Money, Losing Identity
The fear of running out of money in retirement (aptly nicknamed “FORO”) represents the most common anxiety among retirees. This concern significantly impacts quality of life, especially during early retirement years when people have more energy and opportunities. Many retirees consequently enter a ‘lifestyle deficit,’ foregoing simple pleasures like dining out or pursuing long-dreamed-of hobbies.
Beyond financial worries, many individuals experience profound concerns about their identity. For those whose careers provided structure, purpose and social connections, retirement can trigger feelings of loss and confusion. As one retiree expressed, “Without my work, who am I? What value do I have?” This identity crisis particularly affects professionals from knowledge-based fields, where expertise forms the core of their self-concept.
Emotional and Financial Concerns are Linked
The connection between emotional well-being and financial security in retirement runs deep. Although many assume retirement spending increases over time—first with travel, then with healthcare—research shows spending actually tends to decrease with age. Nevertheless, uncertainty about future needs generates anxiety regardless of actual spending patterns.
Additionally, workplace relationships play a crucial part in the social networks of many people. The loss of these connections increases the risk of isolation, with social separation ranking as a top fear of retirement, alongside financial concerns. Many new retirees experience a profound sense of disempowerment, struggling to adapt to unstructured time after decades of productive routine. According to psychological research, having excessive unstructured time doesn’t automatically translate to greater happiness.
Get Clarity on your Financial Future
Achieving financial clarity serves as a powerful antidote to retirement anxiety. By understanding your financial landscape, you can transform vague worries into concrete plans that address specific concerns.
Starting Capital and Income Sources
Determining your financial starting point is the foundation of retirement planning. Begin by taking stock of your current worth—including superannuation, savings, investments and property assets. Review your super statements carefully, checking your balance, contributions, fees, and investment performance. This comprehensive financial inventory reveals your actual financial position and highlights areas that need attention.
Identify all potential income sources for your retirement years. These typically include:
- Superannuation and pension funds
- Investment returns from shares or property
- Part-time work or consulting opportunities
- Government Age Pension (if eligible)
Understanding these sources helps calculate how much you’ll have available and whether you’re on track to fund your desired lifestyle.
Use Forecasting Tools to Model Different Scenarios
Retirement planning tools offer valuable insights by modelling various financial futures. These forecasters allow you to adjust variables—such as retirement age, spending levels, and investment strategies—to see how different decisions impact your financial security.
Most comprehensive retirement calculators provide real-time feedback showing your “out of savings age,” estate value, lifetime tax liability, and projected income-expense balance over time. Many super funds offer these tools at no extra cost, helping members estimate their retirement balances and explore different scenarios, such as retiring earlier or adjusting lifestyle expectations.
Factor in Inflation and Longevity
Inflation silently erodes purchasing power over time. A basket of goods costing AUD 764,495 in 2010 would cost AUD 1,103,187 in 2024—a 44.3% increase over 14 years due to average annual inflation of 2.7%.
Equally important is understanding your personal risk of longevity. Rather than planning for average life expectancy—which means half of people will outlive this estimate—consider various confidence levels. For a 65-year-old couple, planning to age 94 provides 50% confidence, while planning to age 98 offers 75% confidence, and planning to age 100 gives 90% confidence that the funds will last. This personalised approach helps determine a realistic planning horizon beyond simplistic averages.
Build a Flexible and Resilient Plan
Creating a resilient retirement plan involves building flexibility to weather life’s uncertainties. Most importantly, this approach addresses a core driver of retirement financial anxiety—the fear of outliving one’s money.
Adjust Spending Habits to Extend Savings
Research reveals that many retirees maintain substantial balances even into their 80s, with the top 10% of those aged 80 and above holding average balances of AUD 573,371. Creating a retirement budget with categories for essential costs (such as groceries, utilities, and health) versus discretionary spending (like dining and entertainment) provides more precise spending boundaries. Notably, spending typically decreases throughout retirement rather than increasing.
Diversify Income Sources: Super, Pension, Work
Relying on multiple income streams offers greater security. Consider accessing your super as an income stream through an account-based pension, which provides regular payments while keeping your money invested and potentially growing. Transition-to-retirement pensions provide individuals over 60 with the flexibility to work fewer hours while maintaining a consistent income. Moreover, guaranteed lifetime income products provide stability regardless of market conditions.
Plan for Market Ups and Downs
Market volatility is normal—historically, the average intra-year decline has been approximately 14%, yet annual returns remained positive in 34 of 45 years. To manage this reality, consider the “bucket approach”:
- Short-term bucket (1-3 years): Cash and short-term bonds
- Medium-term bucket (3-10 years): Intermediate investments
- Long-term bucket (10+ years): Growth investments
This strategy prevents forced asset sales during downturns.
Seek Support and Stay Connected
Managing retirement anxiety effectively often requires seeking outside perspectives and building a support network. Beyond creating financial plans, having the proper guidance and connections makes the transition into retirement much smoother.
Seek Professional Guidance
Licensed financial advisers provide personalised strategies based on your specific circumstances. When selecting an adviser, check their qualifications, experience, and fee structure. Many providers offer an initial meeting at no cost, allowing you to compare services before making a commitment. A good adviser works with you to understand your needs, helps set achievable goals, and creates plans to reach them.
Use Free Resources
Several free services are available to assist with retirement planning. The Financial Information Service (FIS) offers confidential education on financial matters, although it does not provide specific advice. Super funds typically provide calculators that model different retirement scenarios—helping you estimate balances and explore options like earlier retirement. The MoneySmart website features tools for budgeting, saving, and retirement planning that can clarify your financial position.
Stay Socially Active to Reduce Emotional Stress
Strong social connections are crucial for maintaining mental well-being in retirement. Without workplace interactions, many retirees experience isolation, which increases the risk of depression and anxiety. Consider joining interest-based groups, such as book clubs, walking groups, or volunteer organisations. Maintaining long-standing relationships requires effort, but it pays dividends in terms of emotional health. Even small acts of self-care in your daily routine can significantly enhance your mental well-being. For professional support, therapists or counsellors can provide guidance through the emotional aspects of this life transition.
Conclusion – Retirement Anxiety
Retirement anxiety affects millions of people worldwide, though taking proactive steps certainly alleviates these common fears. Financial preparedness remains essential, yet equally important are the psychological and social aspects of this significant life transition. Addressing both dimensions creates a holistic approach to retirement planning that fosters genuine confidence.
Understanding your financial standing serves as the foundation for effective retirement planning. Therefore, compiling comprehensive information about your superannuation, investments, and potential income sources allows for more transparent decision-making. Armed with this knowledge, retirement calculators and forecasting tools become powerful allies in modelling various scenarios based on your unique circumstances.
Retirement represents one of life’s most significant transitions, yet proper preparation transforms potential anxiety into anticipation. Starting now—regardless of age—allows time for adjustments and refinements to your retirement vision. Everyone deserves peace of mind during their golden years, and thankfully, the path to retirement confidence begins with practical steps anyone can take.
What are the most common fears associated with retirement?
The two most prevalent fears are running out of money and losing one’s sense of identity. Many retirees are concerned about how long their funds will last. In contrast, others struggle with the loss of purpose and social connections that often come with leaving the workforce.
What strategies can help make my retirement plan more resilient?
Build flexibility into your plan by diversifying income sources, such as combining superannuation, pensions, and part-time work. Adjust your spending habits to maximise savings, and utilise the “bucket approach” to manage investments for various time horizons. This can help you weather market fluctuations more effectively.
How important is social connection in retirement?
Social connections are important for the mental well-being during retirement years. Without workplace interactions, many retirees risk isolation, which can lead to depression and anxiety. Staying socially active through interest groups, volunteering, or maintaining existing relationships can significantly reduce emotional stress and improve overall quality of life.