Australian retirees increasingly report financial insecurity as a reason for returning to work or delaying retirement. The biggest financial mistakes retirees make are key drivers, including rising living costs, inadequate savings, unexpected expenses, misunderstanding of retirement entitlements, and unsound investment or spending decisions. (The Guardian)

Common Financial Mistakes & Their Effects

Here are major mistakes retirees make, backed by data, and how they contribute to financial stress or the need to return to work.

Mistake	What It Looks Like in Practice	Evidence / Data	Why It Causes Risk
1. Not adjusting spending habits after retirement	Continuing to spend like during working life (housing, travel, discretionary items, etc.), not scaling back when income drops.	Data from Spirit Super via Compare My Spend shows retirees’ spending in the 75+ age band declines 15–25% vs age 60–64, depending on affluence level. (Firstlinks) But many retirees don’t reduce enough.	If income (super + pension) is fixed or declining (especially after investment returns or due to inflation), staying on high spending means depleting savings faster. This forces return to work or reliance purely on pension.
2. Failing to have a solid financial / retirement plan	Not modelling how long savings must last, ignoring inflation, healthcare costs, or future shocks. Delay in applying for Age Pension, or underestimating required retirement income.	The Retirement Income Review (Australian Treasury) found that many people do not understand how the system works — e.g. what retirement income means, drawdowns, interaction with Age Pension. (Grattan Institute) Also, “Most retirees find planning stressful,” many find it complicated. (Grattan Institute)	Without a plan, retirees are exposed to “surprises” — unexpected costs, lower returns, longer lifespan — which can erode savings rapidly. They may end up working again simply to patch income shortfalls.
3. Making unwise investment decisions	Overly risky investments at a late age; being too conservative and missing returns; not diversifying; trusting investment platforms without reviewing risk. Investments in collapsed or risky funds.	Recent reports: over $1 billion lost by Australians due to collapsed super/super-linked investment schemes (First Guardian, Shield Master Fund, etc.). (The Guardian) Also, many retirees draw down more than minimum or don’t understand drawdown rules. (Vanguard Australia)	Bad investments erode capital or return. If investments suffer losses (market downturns, fund failures), retirees may need to liquidate at a bad time, reducing sustainability of income.
4. Early withdrawal / misuse of superannuation or other retirement benefits	Withdrawing preserved super early (including via schemes like the COVID-19 Early Release Scheme), using it for non-essential spending or things that do not improve long-term stability.	The COVID-19 Early Release Scheme: ~4.6 million payments, ~$18B in first tranche and ~$17B in second, many among people with small balances. (APRA) Study by Bateman et al shows many withdrew because of immediate need, but some did so without fully considering long-term impact. (Institut sur la retraite et l’épargne)	Withdrawing savings reduces future income streams. The compounding growth and tax advantages of keeping super intact may be lost. Less buffer for bad times or longevity risk.
5. Overspending and not maintaining an emergency fund	Using pension or super income freely on non-essentials; no savings left for unexpected events; accumulating debt; dipping into savings for emergencies.	Data: 15% of Australians have no money in their emergency fund. Average emergency fund among Boomers ~$23,500. (Compare the Market) Also, reports that many retirees find their pension and super consumed by essential costs – utilities, groceries, etc., leaving little margin. (News.com.au)	Without an emergency fund, even small unexpected expenses can force borrowing or early withdrawals or selling assets. This eats into regular income or savings, making return to work more likely.

 

Practical Advice: How Retirees Can Avoid These Mistakes

Here are actionable strategies retirees (or those about to retire) can take to avoid falling into the trap of returning to work out of necessity.

1. Build and update a detailed retirement budget.
   • Start by estimating your post-retirement living costs, including fixed essentials (housing, utilities, food, healthcare) and discretionary spending.
   • Include inflation (e.g. even a moderate 2-3% per year becomes significant over 20+ years).
   • Plan for different retirement phases: the early active years, middle years, twilight years (when health or mobility may limit spending).
   • Review this budget annually, especially after major life changes (health, spouse passing, change in pension entitlements).
2. Ensure you understand all retirement income sources and entitlements.
   • Know when and how to apply for Age Pension; don’t delay applying. Some retirees leave possible pension credits on the table by misunderstanding eligibility. (CFS)
   • Be aware of tax rules affecting super or pension-phase funds.
   • Factor in any government benefits or concessions (health card, concessions for rates, utilities, etc.).
3. Invest wisely, balancing risk and growth.
   • Diversify: don’t put all eggs in one investment or fund. If one fails, you lose heavily. Recent super fund failures show how concentrated risks can hurt. (The Guardian)
   • Consider your risk tolerance carefully. As you age, capacity to recover from market losses typically decreases.
   • Use professional advice. Financial advisers can help with drawdown strategy: how much to withdraw each year so savings last without being overly conservative or overly risky.
4. Avoid early withdrawals unless absolutely necessary.
   • Early access to super (outside of hardship rules) usually means giving up future growth and possibly facing penalties or lost tax advantages.
   • If you must withdraw, try to limit amounts and think through alternatives (budget cuts, other income sources).
   • Keep track of long-term consequences: shorter time horizon to recover losses, reduced buffer against longevity risk.
5. Create and maintain a robust emergency fund.
   • Aim for 3-12 months of essential expenses saved in accessible, low-risk accounts (high-interest savings, term deposits etc.).
   • Avoid tapping into emergency fund for lifestyle “extras” — preserve it for shocks.
   • Plan for likely shocks: health problems, house repairs, inflation increases, rising utilities.
6. Monitor spending and adjust over time.
   • Use actual data: bank statements, digital spending tools to see where money is going. Retiree spending tends to drop with age (as noted above), but if yours doesn’t, that could be a warning sign. (Firstlinks)
   • Be particularly careful in early years of retirement: people often overestimate how long they'll spend at “peak” levels (travel, hobbies, dining), and underestimate how costs shift (health, domestic help, mobility).
   • Adjust lifestyle expectations where needed rather than waiting until savings are gone.
7. Plan for longevity and health care costs.
   • Australians are living longer; some retirees will live well into their 90s. Planning for 25-30 years (or more) of retirement is prudent.
   • Factor in costs of healthcare, possible aged care, or assisted living. Medicare doesn’t cover all; many women outlive their savings (so planning on spousal resources or personal savings is important).
   • Consider insurance or other tools to cover large, unpredictable expenses.
8. Seek good, affordable advice and maintain financial literacy.
   • Retirement systems, superannuation rules, tax, Age Pension criteria are complex. Misunderstanding them can cost a lot. The Retirement Income Review points to “misconceptions and low financial literacy” as areas that hurt people. (Treasury)
   • Use resources: financial advice (certified), community resources, online calculators, trustees of super funds.
   • Regularly revisit your plan: markets change, government policy changes, personal circumstances change.

Case Examples: Financial Mistakes Retirees Back to Work

To make it concrete, here are hypothetical but realistic illustrations.

• “Ann & George, 67/70, high spending early”: They retire with super + pension, but Ann keeps up international travel, expensive hobbies, and doesn’t adjust home upkeep costs. Their investments do okay, but inflation plus a dip in investment returns eats into their capital. By age 75, they are needing to sell some assets or take a part-time job to maintain lifestyle. If they instead reduced discretionary spending early, scaled back travel, they could have stretched savings sufficiently.
• “Lisa, 62, early withdrawal during COVID”: Lisa accessed early-release super funds to cover immediate costs (rent, groceries). Months later, her super balance is significantly lower; she underestimated how much she lost in growth, and doesn’t have enough cushion. Inflation and health costs erode what remains. To stay afloat, she resumes part-time work.
• “Mark, pre-retiree but no planning”: He expects life to continue much like working life once he stops. He underestimates cost of utilities, medical visits, groceries as prices rise. Doesn’t apply for Age Pension right away. He also invested heavily in a scheme that collapses. He finds he has to take casual work in later years to pay bills and rebuild emergency savings.

Practical Checklist for Secure Retirement

Here is a checklist retirees or those approaching retirement can use to reduce risk of having to return to work out of necessity:

1. Estimate monthly living expenses post-retirement (essentials + discretionary)
2. Add buffer for inflation, healthcare, long-term care
3. Check ability to access Age Pension, apply when eligible
4. Review superannuation drawdown strategies and investment allocation
5. Set aside an emergency fund (3-12 months of essential expenses)
6. Avoid or minimise early withdrawals or early retirement without planning
7. Monitor spending via tools or statements; adjust when spending diverges from plan
8. Reassess regularly: health, life expectancy, family / partner situations
9. Use financial advice when unsure
10. Document plan (written or in software) and share with trusted person(s) so continuity and review are more likely

Conclusion

Retirement should ideally be a time of freedom, not financial stress. But many retirees in Australia face risk of returning to work due to mistakes that could have been avoided with planning, realistic budgeting, and disciplined decision-making. The biggest pitfalls are not adjusting spending after retirement, lacking a full picture of one’s financial life (including entitlements and costs), making poor investment or early-withdrawal choices, overspending without safety nets, and neglecting emergencies and health costs.

If retirees or soon-to-be retirees adopt foresight, seek advice, monitor their financial health, and plan for shocks, they can reduce the chances they’ll need to reenter the workforce not by choice but out of necessity. It’s never too late to review and adjust.

 

References

1. Australian Bureau of Statistics. Retirement and Retirement Intentions, Australia, 2022-23. ABS, May 2024. https://www.abs.gov.au/statistics/labour/employment-and-unemployment/retirement-and-retirement-intentions-australia/latest-release
2. The Guardian. Why retirees are returning to work. March 2025. https://www.theguardian.com/industry-super-australia-retiring-well/2025/mar/17/why-retirees-are-returning-to-work
3. News.com.au. Retirement savings crisis: Aussies forced to work longer due to cost of living. 2025. https://www.news.com.au/finance/work/at-work/retirement-savings-crisis-aussies-forced-to-work-longer-due-to-cost-of-living/news-story/cc8dd111932437c705ac3bbf5f2a25dd
4. The Guardian. Investment fund collapse linked to superannuation platforms: First Guardian, Shield Master Fund. July 2025. https://www.theguardian.com/australia-news/2025/jul/24/investment-fund-collapse-linked-to-superannuation-platforms-first-guardian-shield-master-fund-australian-fiduciaries-ntwnfb
5. Bateman, H., Thorp, S., et al. Determinants of Early-Access to Retirement Savings: Lessons from the COVID-19 Pandemic. 2022. https://ire.hec.ca/wp-content/uploads/2022/11/Thorp_Determinants-of-Early-Access-to-Retirement-Savings-Lessons-from-the-COVID-19-Pandemic.pdf
6. Australian Treasury. Retirement Income Review – Final Report. 2020. https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-ud00b_key_obs.pdf
7. Firstlinks. Retiree spending plummets as we age. Spirit Super analysis, 2023. https://www.firstlinks.com.au/retiree-spending-plummets-as-we-age
8. Compare the Market. How much money do Australians have saved? 2024. https://www.comparethemarket.com.au/news/how-much-money-do-australians-have-saved
9. Vanguard Australia. Why many retirees are underspending. 2023. https://www.vanguard.com.au/personal/learn/smart-investing/retirement/why-many-retirees-are-underspending
10. Australian Institute of Family Studies. Towards COVID normal: Early release of superannuation through a family lens. 2021. https://aifs.gov.au/research/research-reports/towards-covid-normal-early-release-superannuation-through-family-lens