Retirement should represent freedom not fear. Yet many Australians experience FORO (Fear of Running Out) as they transition from accumulation to decumulation. Despite substantial savings, retirees often hesitate to draw down, concerned their funds may not last the full span of retirement.
This behavioral hesitation underpins the annuity puzzle: why are lifetime income products so rarely adopted? The barriers are not purely financial they are psychological and strategic. Issues of control, complexity, and legacy planning play a role. But framing is critical. When annuities are positioned as protection against longevity risk rather than as investment vehicles, uptake improves. Language shapes outcomes.
In response, the Retirement Income Covenant calls on superannuation funds to move beyond product provision and actively support members in making confident, sustainable income decisions. Addressing FORO requires a strategic reframing from capital preservation to purposeful consumption.
"We need to shift the conversation from saving for retirement to spending in retirement."
From the article published February 28, 2023
