What are the psychological mechanisms that lead retirees to treat income and capital differently?

The retirement spending puzzle

In 2014, US researcher David Blanchett coined the term ‘retirement spending smile’^[1], a concept that has since become embedded in mainstream retirement incomes thinking around the world. The spending smile derives its name from the ‘U-shape’ curve that emerges when retiree spending is plotted against age – the simplistic explanation being that spending peaks in the early years, trends down in the middle years, and then ticks back up in later life as health costs rise.

More recently, however, experts who agree with the decline part of the smile are starting to question the evidence around the uptick. One of those experts is Blanchett himself. His fresh research^[2] – ‘How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else?’ – has raised the possibility that the later-life uptick may be less pronounced in countries with state-funded health and aged care systems such as Australia. The smile, in other words, may look more like a smirk here.

Australian evidence from a range of sources supports this downward spending trajectory. Milliman estimated^[3] that the median retired couple’s expenditure falls by more than one-third (36.7%) as they move from their peak spending years in early retirement (65 to 69) into older age (85 and beyond), with the decline accelerating sharply once retirees pass 80. The Grattan Institute’s analysis^[4] of ABS household expenditure and bank transaction data covering more than 300,000 Australian retirees found no evidence of a late-life uptick either, with spending slowing from around age 70 and falling rapidly after 80.

But while the evidence around declining spending seems substantial, the more pertinent question is perhaps not whether retirees spend less as they age, but whether they are spending less than they safely could. This article will set out to investigate and explain that paradox, and the ways advisers can respond.

Having enough and feeling able to spend are different things

Part of the answer to the question lies in a distinction that’s easy to state but harder to act on – preparedness and confidence are not the same thing.

Retiree preparedness reflects readiness, and is steeped in functional dimensions of retirement:

• Am I financially prepared?
• Do I have a documented plan?

Confidence, on the other hand, is an emotional dimension:

• Am I confident that I won’t outlive my savings?
• Am I confident enough to spend?
• Am I confident enough to make the big decisions often required in retirement, such as downsizing or committing capital?

Blanchett’s 2026 analysis^[5] applies the ‘funded ratio’ – a metric borrowed from pension-plan analysis – to quantify these dimensions. A funded ratio of 1.0 means a retiree has exactly the amount of assets required to fully fund all projected future spending needs, while a ratio above 1.0 means they already have enough to sustain current spending indefinitely, without cutting back.  Blanchett’s study of a cross-section of retirees found those at the 1 – 1.49 funding ratio still cut real spending by 3.1% a year, and even those with a ratio of 1.5 –1.99 cut back by 1.2% a year. Only once assets reached double what was actually needed (a ratio of 2.0 and over) did spending see any growth, and even then, by just 1.1% a year in real terms.

In other words, retirees with no financial need for caution keep behaving cautiously anyway.

This is the well-resourced but under-confident retiree familiar to most advisers – financially capable of spending more, but not psychologically able to. While a well-constructed financial plan can optimise preparedness, it doesn’t solve for confidence. In fact, confidence is actually a critical input into the retirement planning process, rather than simply an outcome of it.

This isn’t just an academic problem, nor one for advisers to solve alone. ASIC and APRA’s 2025 Pulse Check on the Retirement Income Covenant^[6] found many trustees still lag in helping members engage with drawdown decisions, and Treasury’s newly released Best Practice Principles for retirement income solutions^[7] now explicitly call on trustees to engage members so they can make informed decisions, not simply to design compliant products. The regulatory focus is broadening beyond product adequacy to how effectively members are supported to make retirement income decisions.

But if the gap isn’t a financial one, what is it?

Part of the answer to this question lies in how retirees mentally sort their own money, and how they treat income and capital quite differently.

Why $1 of income doesn’t feel like $1 of capital

In the rational world of economic theory, a dollar is a dollar, regardless of where it came from or what account it sits in. But this doesn’t reflect our real-world attitudes to money. The behavioural concept of ‘mental accounting’ describes how people assign money to separate mental accounts (for example, savings, income, windfalls, ‘fun money’) and apply different rules of spending discipline to each, even though the underlying dollars are interchangeable.

A growing body of retirement income research suggests this mental sorting of money is a key driver of observed retiree behaviours around the world. Blanchett and Finke’s 2025 research^[8], tracking how US retirees actually fund their spending, found that around 85% of available lifetime income – including pensions, annuities and Social Security retirement payments – gets spent each year, compared with only about half of wages and capital income. Spending from savings is lower again: withdrawal rates for 65-year-old couples averaged just 2%, around half the commonly cited 4% rule.

Put simply, retirees readily spend money that arrives as income, but when it comes to capital they tend to hold back, and spending requires a conscious decision to draw down. In other words, a regular payment gets treated as something to use, while a balance in an account gets treated as something to protect.

There is an often-overlooked implication of this phenomenon.

The legislated minimum drawdown, intended purely as a prudential floor, may itself function as a mental-accounting cue, signalling ‘the right amount to take’, rather than a regulatory minimum. Recent Australian research into decumulation decisions^[9] points to exactly this kind of anchoring effect, and Grattan’s previously mentioned Simpler Super research found around one in five retirees drawing the minimum from their Account Based Pensions falsely believe this figure is what the government recommends. If a government-set number can anchor spending downward regardless of what a client’s actual resources support, the framing of a figure matters as much as the figure itself.

For advisers, the practical takeaway isn’t to make clients suspicious of their own instincts. Mental accounting is, after all, a normal human way of managing money. The takeaway is that the form a dollar of retirement income takes – income versus capital – can change whether a client is willing to spend it, regardless of whether they can actually afford to.

The framing effect

The framing of how retirement savings are accessed is clearly important, and a well-known piece of US research^[10] tested the importance of this directly. Presented with a choice between a life annuity and a savings account, 72% of respondents to the study by Brown et al preferred the annuity when the choice was framed in terms of consumption – what the product would let them spend each month. Preference for the same annuity dropped to just 21% when the same choice was framed in terms of investment – its risk and return characteristics relative to the savings account.

In this experiment, the products didn’t change, but the framing did.

The orthodoxy of compliant advice in Australia means that most retirement planning conversations default heavily to investment-based framing: balances, returns, risk tolerances. Through this lens, converting capital into guaranteed income can look unattractive, as it typically means handing over a large amount of savings in exchange for reduced access and uncertain returns. The consumption frame asks a different question entirely: what will this guaranteed income stream actually let me spend, with certainty, for the rest of my life?

This isn’t to suggest advisers downplay the access implications of income stream decisions (many newer guaranteed income solutions offer far more flexibility and access anyway). Rather, advisers should present both dimensions deliberately, so clients understand the consumption purpose of a capital allocation as clearly as they understand its balance-sheet effect. A client shown only what they’re giving up will evaluate a decision differently to a client shown both what they’re giving up and what they’re gaining, even when the numbers are identical.

From sustainable withdrawals to sustainable income

Most retirement income modelling is built to answer one question: what withdrawal rate can this portfolio sustain? While this is clearly an important calculation, we have already seen that this number in itself doesn’t build confidence to spend.

A spreadsheet showing a client can withdraw $70,000 a year doesn’t automatically create the confidence to spend $70,000 a year, particularly when that $70,000 comes from a capital base the client is watching ‘shrink’ in real time.

Building genuine spending confidence requires the adviser to go further than the sustainability calculation, and consider:

• How much of a client’s expenditure is essential versus discretionary
• Which income sources the client regards as genuinely dependable
• Whether actual spending is persistently falling below planned spending
• Whether balance declines, rather than income adequacy, are the trigger for a client’s anxiety
• Whether the client needs an explicit spending rule or income floor, rather than a withdrawal range, to feel able to act

Creating permission to spend

There are several practical ways for advisers to create more confident retiree clients:

• Treat confidence as an objective rather than an outcome
  Specifically talk about it during discovery meetings. Ask the client how confident they feel on a scale of 1 to 10. Ask them again from time to time and track the progress. At review time, check spending patterns for signs of excessive caution, and ‘unleash the shackles’ if necessary.
• Shift the conversation from balances to income
  Loss aversion is triggered when balances fall, so reframe performance around long-term income projections rather than portfolio value. Bucketing strategies reinforce this, as clients feel less exposed when they know near-term needs are secured, and will be more willing to hold growth assets with the remainder.
• Review actual spending against planned spending
  A client persistently underspending their plan is showing you a confidence problem, not a preparedness problem, and the two need different responses.
• Use reviews to renew spending permission
  CFS research^[11] found 77% of advised retirees are currently enjoying retirement, compared with 52% of those who have never received advice. This speaks not just to your role in providing a framework and progress updates, but your role as a confidence coach. Telling your clients ‘You’re on track, take that holiday’ provides a priceless confidence boost that even the best investment performance can’t deliver.

While none of these actions replace sound modelling, they do need to sit alongside it. A technically optimal plan a client won’t act on will always deliver a sub-optimal outcome, regardless of how good the modelling is.

Income layering: changing both the economics and the psychology

Guaranteed income solutions are usually pitched on their economics: reducing longevity risk and providing certainty against market downturns. But while both are true, the mental accounting research referenced earlier sets up a more powerful framing.

If retirees spend income far more readily than they spend capital, then converting more of a client’s retirement savings into a guaranteed income stream should create more permission, and more confidence, to spend.

The obstacle has traditionally been the belief that securing guaranteed income means giving up flexibility and access. Traditional annuities may offer certainty, but that certainty typically comes at the cost of the liquidity and control that irreversibility-averse clients are reluctant to surrender. Account-based pensions, on the other hand, offer flexibility but no certainty, leaving clients to effectively self-insure against longevity risk by spending more cautiously than required.

Income layering strategies tackle this conundrum head on, by treating guaranteed income as just one layer within a broader strategy, effectively allowing clients to ‘diversify’ the amount of commitment they are required to give. A new breed of retirement income products, for example AGILE from Allianz Retire+, is built for exactly this scenario, allowing clients to calibrate how much of their income they choose to guarantee while retaining flexible access to capital if circumstances change.

Rather than forcing a choice between certainty and control, this approach secures the retirement clients can’t yet see (Chapter Two), so they don’t need to second-guess the one they can (Chapter One)^[12].

From capacity to confidence

Retirement income advice has traditionally devoted enormous attention to the question of how much clients can safely spend. The evidence explored in this article suggests advisers need to pay equal attention to whether clients will actually feel comfortable spending it.

That means recognising that a technically sustainable level of expenditure may still feel unsafe to a client watching their capital decline, and that the way retirement resources are structured and presented can influence behaviour just as surely as investment returns or withdrawal rates.

For advisers, the opportunity is to bridge that gap. By identifying signs of unnecessary caution, framing retirement resources around the income and lifestyle they can support, and combining dependable income with sufficient flexibility, advisers can help turn financial capacity into spending confidence.

After all, a successful retirement plan isn’t only built to ensure a client’s money lasts, it’s also built to give them the confidence to spend that money while they can.

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References:
[1] https://www.financialplanningassociation.org/sites/default/files/2020-09/MAY14%20JFP%20Blanchett_0.pdf
[2] https://onlinelibrary.wiley.com/doi/10.1002/cfp2.70032
[3] https://au.milliman.com/en/insight/analysis-retirees-spending-falls-faster-than-expected-into-old-age
[4] https://grattan.edu.au/report/money-in-retirement/
[5] https://onlinelibrary.wiley.com/doi/10.1002/cfp2.70032
[6] https://www.apra.gov.au/news-and-publications/pulse-check-retirement-income-covenant-implementation-2025-industry-update
[7] https://treasury.gov.au/publication/p2026-743986
[8] https://onlinelibrary.wiley.com/doi/full/10.1002/cfp2.70010
[9] https://www.sciencedirect.com/science/article/pii/S2214635025000942?via%3Dihub
[10] https://www.aeaweb.org/articles?id=10.1257%2Faer.98.2.304
[11] https://www.cfs.com.au/about-us/media/cfs-research-finds-attitudes-towards-retirement
[12] https://www.allianzretireplus.com.au/campaign/the_two_chapter_retirement1.html

This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This information is current as at August 2026 unless otherwise specified and is for general information purposes only. It is not comprehensive or intended to give financial product advice. Any advice provided in this material does not take into account your objectives, financial situation or needs. Before acting on anything contained in this material, you should speak to your financial adviser and consider the appropriateness of the information received, having regard to your objectives, financial situation, and needs. No person should rely on the content of this material or act on the basis of anything stated in this material. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material.

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(L to R): Catherine van der Veen and Lucy Fost

Allianz Retire+ has announced the launch of Allianz Guaranteed Income for Life: Super+ (AGILE Super+), a new direct superannuation pathway that significantly expands access to its guaranteed lifetime income solution for eligible Australians.

The launch responds to growing adviser demand for access to Allianz Guaranteed Income for Life (AGILE) beyond the existing platform-based offering. AGILE Super+ allows clients to invest directly using superannuation money, without requiring a platform, opening the product to a substantially broader adviser and client market.

The new pathway complements existing AGILE investment channels available through platforms, trusts and self-managed super funds (SMSFs) for superannuation money, or direct with non-superannuation money.

Chief Distribution and Marketing Officers Catherine van der Veen and Lucy Foster, said:

“Demand for AGILE is up approximately 40% on this time a year ago, with levels of interest and inquiry increasing significantly as the market’s understanding of AGILE and similar products develops.

“There is no doubt that this segment of the market is a game changer for retirees – especially in a time of volatile markets – and that is becoming much more clearly understood and accepted by advisers.

“The introduction of AGILE Super+ is fundamentally an access and advice story. We’re enabling a broader range of advisers to incorporate guaranteed lifetime income solutions into retirement strategies, regardless of the platform they use.”

Broadening access

AGILE Super+ has been designed for individuals aged 50 to 80 who are planning for, or already in, retirement and wish to invest using superannuation money.

Unlike traditional platform-based implementation, clients can rollover superannuation directly into AGILE Super+, providing advisers with a simple and efficient way to access Allianz Retire+’s guaranteed lifetime income solution for their clients.

Importantly, AGILE Super+ can accept superannuation investments before a client has met a Relevant Condition of Release, allowing advisers and clients to plan ahead and establish a future guaranteed lifetime income strategy earlier in the retirement journey.

While there are some differences in features, the solution maintains the core AGILE proposition advisers are familiar with, including:

• Investment growth potential with a safety net
• Guaranteed income for life that never stops or drops once commenced
• Flexible access to your money in accordance with product terms

Supporting Age Pension outcomes

• A key feature of AGILE Super+ is the automatic inclusion of the Age Pension+ feature upon meeting a Relevant Condition of Release.
• As an innovative lifetime income stream, AGILE Super+ may assist eligible retirees in optimising Age Pension entitlements through favourable assets test treatment, while continuing to benefit from a guaranteed income stream for life.
• The automatic application of Age Pension+ distinguishes AGILE Super+ from AGILE, where the feature is elective.
• For eligible clients, this combination of guaranteed lifetime income and potential Age Pension benefits can help improve overall retirement income sustainability*.

Helping advisers create retirement income confidence

One of the biggest challenges facing retirees is the fear of running out of money. As a result, many retirees spend less than they can afford, despite having accumulated significant retirement savings.

AGILE Super+ provides advisers with another way to help clients create what Allianz Retire+ describes as “income bandwidth” by allocating a portion of retirement savings to a future guaranteed income stream while maintaining flexibility across the remainder of their portfolio.

For example, advisers may choose to allocate a portion of a client’s retirement savings today, creating a future guaranteed income stream that has the opportunity to grow over time before being activated later in retirement. As the client’s broader portfolio evolves through investment returns and ongoing contributions, AGILE can represent a relatively smaller proportion of total assets while potentially contributing a disproportionately larger level of guaranteed income when switched on.

This layered retirement income approach can help clients feel more confident about spending and enjoying their retirement, knowing part of their future income is secure regardless of market conditions.

Chief Distribution and Marketing Officers Catherine van der Veen and Lucy Foster said: “Guaranteed lifetime income is not just about securing income. It’s about providing retirees with the confidence to use the savings they’ve worked so hard to accumulate.

“By creating certainty around future income, advisers can help clients make more informed spending decisions and approach retirement with greater peace of mind.”

The launch of AGILE Super+ reflects Allianz Retire+’s commitment to making guaranteed lifetime income solutions more accessible to Australian financial advisers and their clients.

By providing an additional implementation pathway alongside existing platform, trust and SMSF options for superannuation money, AGILE Super+ enables a broader range of advisers to access Allianz Retire+’s guaranteed lifetime income solution and incorporate it into retirement income strategies for eligible clients.

As demand grows for solutions that help address longevity risk and provide greater retirement income certainty, AGILE Super+ supports advisers with increased flexibility in how they implement lifetime income strategies.

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Rachel joins Allianz Retire+ from AMP, where she was a New Business Manager for the North platform. She brings more than 30 years of experience across wealth management, distribution and relationship management, having held senior roles with AMP, VGI Partners, Pengana Capital Group and Australian Unity.

She also has a strong track record of industry leadership and advocacy, having previously served as President of Women in Finance Queensland, and currently sitting on FINSIA’s Queensland Regional Council.

Chief Distribution and Marketing Officers Catherine van der Veen and Lucy Foster said Rachel’s appointment reflects Allianz Retire+’s continued investment in supporting advisers in delivering better retirement outcomes for Australians.

“Rachel joins Allianz Retire+ at an exciting time for the business,” van der Veen and Foster said.

“She brings deep industry experience, strong adviser relationships and a genuine passion for helping financial professionals deliver better outcomes for their clients.

“As demand for retirement income solutions grows, expanding our distribution capability ensures more advisers can access innovative products and strategies that help Australians retire with confidence.”

The appointment comes as Allianz Retire+ continues to build momentum, with uptake of its flagship retirement income solution Allianz Guaranteed Income for Life (AGILE) increasing by 31 per cent since January 2026.

Commenting on her appointment, Rachel said she was delighted to join Allianz Retire+, a business focused on addressing one of Australia’s most significant financial challenges.

“I am passionate about helping financial professionals access outstanding products and strategies that improve outcomes for clients while supporting business growth and efficiency,” Ms Elfverson said.

“Allianz Retire+ is helping shape the future of retirement income in Australia, and I’m looking forward to working closely with advisers across Queensland to help more Australians achieve confidence and security in retirement.”

Rachel’s appointment follows a period of continued recognition and growth for Allianz Retire+, including Chief Distribution and Marketing Officer Catherine van der Veen being named ‘Thought Leader of the Year’ at the Money Management 38th Annual Fund Manager of the Year Awards.

The business also recently announced the appointment of Kiru Anantharaj as Senior Manager, Retirement Solutions, further strengthening its retirement expertise and adviser support capabilities.

The post Allianz Retire+ strengthens Queensland presence with senior appointment amid continued growth appeared first on AdviserVoice.

The Two-Chapter Retirement framework highlights how behavioural biases can shape retirement planning and decision-making.

Introduction

Why do financially secure retirees still hesitate to spend, or commit to strategies that would clearly improve their outcomes?

This article sets out the Two-Chapter Retirement framework, a new way of understanding retirement not as one continuous journey, but as two psychologically distinct phases which clients experience very differently.

Chapter One is the near-term future clients can easily picture: the active years when they’re most open to advice about lifestyle and access to capital. Chapter Two is the distant, harder-to-imagine future, where fear and uncertainty tend to drive overly cautious, defensive decisions.

Drawing on recent Australian research into retiree behaviour, the article explores why this two-chapter mindset produces predictable patterns – declining spending over time, a bias toward minimum drawdowns, and a reluctance to commit to strategies perceived as hard to unwind – and what this means for how advice should be delivered. It examines the practical implications for advisers, including how income layering can help clients achieve both certainty and flexibility, rather than being forced into a choice between the two.

Decision paralysis: The emerging risk to retirement outcomes

For many Australians, the greatest emerging threat to retirement outcomes is no longer market volatility or inadequate savings, but a hesitancy to make the decisions retirement requires. Increasing system complexity and behavioural biases are leaving many otherwise well-resourced retirees reluctant to spend, commit capital or implement strategies that could improve both their financial and emotional security.

Recent Australian research^[1] has reinforced how this persistent decision paralysis among retirees is creating a gap between the retirement they have the financial capacity to achieve, and the retirement they feel confident to live.

While traditional retirement income planning focuses on sustaining target income levels, processes alone cannot resolve the deeply held concerns that lead many retirees to live an overly cautious and constrained retirement. To build genuine confidence, advisers must recognise the underlying tension clients experience between enjoying the present and managing the uncertainty of the future.

In practice, this tension manifests as a ‘two-chapter’ view of retirement: an initial 10–15-year period of active, healthy, ‘golden years’ that clients can readily envision and plan for, followed by a later, more uncertain period characterised by anxiety about health, longevity and financial needs.

Recognising this two-chapter mindset is essential because it shapes how clients respond to advice, perceive risk and evaluate strategies from the outset. Viewing retirement planning through this lens allows advisers to better support clients as they balance the desire to live well today with the need to remain secure tomorrow.

How retirees actually think about the future

Many advisers will be familiar with the often-quoted work by Michael Stein – author of The Prosperous Retirement^[2] – which envisaged retirement spending in three phases: ‘Go-go’ (the early active years when health, energy and independence are at their peak), ‘Slow-go’ (when declining health and shifting priorities see a less active life), and ‘No-go’ (when activity related spending stops but healthcare spending goes up).

While this work may be useful in understanding the typical shape of retirement spending, it is less valuable as a way of understanding client decision processes, because this is not the way clients think. Rather, they tend to think about the future in just two parts – the near-term future which they can vividly imagine, and the distant future which they are largely incapable of picturing, and which is therefore associated with fear and uncertainty.

A recent Australian qualitative study^[3] brought this two-chapter mindset to life.

Surveying a wide cross section of pre-retirees and retirees, Accenture researchers observed:

 “Whatever the journey towards retirement, almost all see their retirement in two distinct chapters”.

Those chapters were described as:

• Chapter One – ‘Maximising enjoyment of retirement’; and
• Chapter Two – ‘Slowing down and getting by’.

The two-chapter mindset is also grounded in a wider body of research^[4] – including work by the Conexus Institute – into the effect of behavioural and decision biases on retirement planning. These include myopia, present bias, and hyperbolic discounting, which limit our ability to effectively plan for the long term, and see us apply an irrationally large discount to the value of future benefits.

Some researchers^[5] have even suggested we think in terms of two selves – our present self and our future self– going as far as to suggest our distant future self ‘feels like a stranger’, and saving is like a choice between spending money today or ‘giving it to a stranger, years from now’. This separation between our two selves makes future planning decisions difficult, which often sees another decision bias – procrastination (decision inertia) – come to the fore.

Chapter One:  The retirement clients can see

Ages 60 – 75

When clients first sit down to plan retirement, the part of the future they engage with most readily is the near-term period immediately following the end of full-time work.  In this chapter, they can vividly imagine how they will spend their time, the lifestyle they want to maintain and the experiences they hope to enjoy while health and independence are intact.

Because this chapter feels tangible and controllable, decision-making is driven by aspirations rather than constraints. Clients think in terms of possibilities: the trips they will take, that new car or home renovation, the time they will spend with family. Financial discussions are framed around enabling this lifestyle, with clients likely to be receptive to strategies that support spending, flexibility and access to capital.

However, even at this early stage, opposing forces are at work.

The pressure to ‘do it all now’ while still healthy and active conflicts with the knowledge that the future is uncertain, and unforeseen events could derail plans.  Paradoxically, many will hold back from experiences they aspire to, struggling to confidently enjoy this part of their retirement.

In this chapter, confidence becomes a critical facilitator of decision making, action, and commitment. When clients feel assured that their long-term needs have been considered, they are more willing to spend and commit to experiences. Without that assurance, even financially well-prepared clients may hesitate, preferring to preserve options rather than fully embrace the golden years they envisaged.

Chapter Two:  The retirement clients cannot see

Ages 75 to 90 and beyond

In contrast to Chapter One, the later period of retirement exists largely as an abstraction at the planning stage. Clients know it will occur, but struggle to picture what it will look like, or what their resource needs will be.

Clients worry about longevity, medical costs, market downturns and loss of independence, but cannot specify the magnitude or timing of these risks. Accenture’s research found that clients may be reluctant to discuss these issues in depth and may even avoid thinking about them altogether.

Because this chapter is distant and uncertain, it is processed primarily through fear-based heuristics rather than detailed planning. This leads many to defer decisions about the future, or to make highly defensive decisions, such as preserving capital, avoiding irreversible commitments and favouring flexibility even when it comes at the expense of tangibly better financial outcomes.

Confidence plays a different – but equally critical role – in chapter two planning. Rather than being an enabler of action, it provides reassurance. Clients seek strategies that reduce uncertainty and ensure that essential needs will be met regardless of how circumstances unfold. When this reassurance is absent, reluctance to spend or commit resources in the first chapter intensifies, because the future feels unsecured.

Behavioural outcomes of the two-chapter mindset

The mental framing of each chapter is not just conceptual, it translates into consistent behavioural patterns observed across spending, decision inertia, and product preferences.

Retirement spending is not steady or smooth

Analysis of data from Australia’s HILDA survey^[6] and the ABS has shown that total household expenditure typically declines across retirement rather than remaining stable, likely reflecting a combination of reduced physical capability, increasing risk aversion and precautionary behaviour in the face of uncertain future needs

Various experts have sought to quantify the extent of this ‘front loading’ of spending.

One researcher^[7] estimated that the median retired couple’s expenditure falls by more than one-third (36.7%) as they move from their peak spending years in early retirement (65 to 69 years of age) and into older age (85 years and beyond). The decline in expenditure for couples was found to be relatively stable in the early years of retirement at about 6% to 8% across each four-year age band, but then rapidly accelerates once retirees pass 80 years of age.

Decision inertia and default bias contribute to frugality and loss

2025 research by the Grattan Institute^[8] linked the cognitively overwhelming complexity of retirement with decision inertia and default bias. In their ‘Simpler Super’ study, 80% of respondents said they found retirement planning complicated, with half (40%) of those saying it was very or extremely complicated.

That same study also found around half of all retirees with account-based pensions draw only the legislated minimum, of whom around one in five falsely believe this figure to be what the government has recommended. A clear reluctance to spend was observed, driven by uncertainty about the future, health concerns, and fear of outliving savings, ultimately resulting in more than 40% of pensioners being net savers.

A Super Members Council (SMC) study^[9] from 2025 similarly observed ‘decision paralysis’ across various stages of the retirement journey. One example they cited was the prevalence of people leaving their superannuation in accumulation accounts even after retirement. While noting that for some this may have been an active decision, their conclusion was that for the estimated 700,000 retirees in such accounts, this was likely explained by complexity-driven decision inertia. They estimated the cost of this inertia to be up to $136,000 per retiree^[10].

Flexibility and liquidity preference

Both the Grattan and SMC studies also highlight a consistent behavioural preference for flexibility over commitment in retirement decision-making.

Grattan notes that strategies designed to mitigate longevity risk often require retirees to surrender liquidity and control, creating trade-offs many are reluctant to accept, while SMC similarly identifies low understanding and concerns about locking away capital as key barriers to lifetime income products. Together, these findings reinforce the idea that a reluctance to commit is not merely caution, but a deep emotional preference for optionality.

The irreversibility barrier

Decisions about the distant future become especially difficult when they are perceived as hard to reverse. Retirement planning often involves multiple commitments of this nature, from housing and capital allocation to income structuring and family support.

Within the two-chapter context, enabling clients to enjoy the early years of retirement requires making them confident that the uncertain later years are secured. Yet the strategies advisers typically use to provide that security – such as establishing a layer of guaranteed future income – can often require a degree of commitment that clients fear may lead to regret or loss of control.

Research^[11] into long-term financial decision-making shows that when a strategy requires retirees to lock in arrangements they perceive as not easily unwound, they effectively apply an ‘irrevocability aversion discount’ to the benefits of that strategy.

The regret aversion bias amplifies this effect. Retirees anticipate the possibility that a decision made today could prove wrong in hindsight, particularly in the face of uncertain longevity, health costs or family circumstance, and therefore delay or dilute commitments that feel permanent.

To the extent that such decisions result in sub-optimal long-term outcomes, irreversibility fears become a risk in their own right, a risk that – along with sequencing, longevity, and other retirement risks – advisers must seek to mitigate.

From insight to action: advice implications

1. Prioritise early decisions while capacity is highest

Research^[12] has shown that our fluid intelligence – our capacity to learn new things – peaks at age 40. Given the complexity of retirement, the window for high impact decisions is therefore at the start of retirement, not later.

This of course creates a challenge for advisers: the strategies that will most influence long-term outcomes are often those clients feel least comfortable committing to early.

However, difficult this may be, establishing a durable foundation for later life, particularly in terms of income security and longevity protection, will allow clients to approach the first chapter of retirement with greater confidence, knowing that essential needs in the second chapter have already been addressed.

2. Treat confidence as the primary behavioural lever

Across both chapters, confidence emerges as the variable that determines whether clients act on advice or retreat into caution. In the early years, confidence enables spending, experiences and lifestyle decisions. In later years, it provides reassurance that essential needs will be met.

Importantly, confidence is not created by comparing income projections against some target level. It arises when clients feel that uncertainty has been managed in a way that preserves both security and control. Strategies that appear financially optimal but psychologically challenging are unlikely to be adopted, regardless of modelling outcomes.

For advisers, this reframes retirement planning from a purely financial optimisation exercise into a human confidence-building process.

3. Income layering as ‘commitment diversification’

The central challenge revealed by the two-chapter mindset is that clients seek certainty and flexibility simultaneously. They want assurance that their future needs will be met, but without feeling that they have surrendered control of their capital made irreversible decisions.

Income layering provides a structural solution to this dilemma. Advisers can construct a plan of diversified income sources, each with different characteristics of certainty, liquidity and reversibility. Layers might include an account-based pension, a lifetime income stream, the age pension, along with other income sources.

In this framework, the client doesn’t risk regret by committing to a single strategy. A guaranteed income layer (comprising the age pension and a lifetime income solution) can secure the foundation of later-life needs, while more flexible components preserve access to capital and adaptability as circumstances evolve. In effect, as well as diversifying income streams, the client is also diversifying commitment levels.

By ensuring that long-term financial security does not depend on committing all capital to arrangements perceived as hard-to-unwind, income layering reduces the psychological barrier to early action. Rather than forcing a choice between certainty and control, it allows advisers to establish a durable income floor while retaining optionality for the years ahead. In doing so, it directly addresses the behavioural constraints identified throughout this paper, enabling clients to act with confidence at the outset of retirement while preserving flexibility across both chapters.

A new paradigm for retirement planning

Viewed through the two-chapter lens, retirement planning is not about choosing between certainty and flexibility, but about structuring both in a way that aligns with how clients actually think about the future. Strategies that address only one dimension will struggle to overcome decision paralysis.

The most effective retirement frameworks will therefore be those that:

• Secure essential lifetime needs early
• Preserve flexibility for evolving priorities
• Build confidence across both chapters simultaneously

When these conditions are met, clients are better able to enjoy the retirement they can see without fearing the one they cannot.

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References
[1] https://smcaustralia.com/app/uploads/2025/10/251028-SMC-Retirement-Report-2_Final-.pdf
[2] https://www.morganstanley.com/cs/pdf/10078209-Retirement-Spending-Reality.pdf
[3] Allianz Retire + research: retiree insights, November 2024, conducted by fiftyfive5, part of the Accenture Song group.
[4] https://theconexusinstitute.org.au/wp-content/uploads/2025/02/Retirement-explainer-11-Behavioural-influences-on-retirement-decisions.pdf
[5] https://pmc.ncbi.nlm.nih.gov/articles/PMC3949005/pdf/nihms550109.pdf
[6] https://www.legacy.challenger.com.au/-/media/shared/challenger/document/research/crir-spending_patterns_in_retirement.pdf
[7] https://au.milliman.com/en/insight/analysis-retirees-spending-falls-faster-than-expected-into-old-age
[8] https://grattan.edu.au/wp-content/uploads/2025/01/Simpler-Super-Grattan-Institute-Report.pdf
[9] https://smcaustralia.com/wp-content/uploads/2025/10/251028-SMC-Retirement-Report-2_Final-.pdf
[10] https://smcaustralia.com/media/complexity-in-the-super-system-could-cost-new-retirees-up-to-136000-in-retirement-new-report/
[11] https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID4555546_code3520657.pdf?abstractid=4555546&mirid=1
[12] https://www.netwealth.com.au/web/media/378487/2020-05_netwealth_retirement-advice.pdf

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Business update

• Strong and accelerating growth: AGILE uptake has increased by more than 30% since January, with repeat usage from advisers continuing to build momentum
• Enhanced value proposition: Recent product enhancements, including reduced fees and earlier access to lifetime income, have further strengthened AGILE’s competitiveness, and
• Addressing advisers’ top concern: Allianz Retire+ research conducted with Core Data in March 2026 showed access to capital is the number one priority for advisers (71%), with AGILE designed to provide flexible access to capital alongside guaranteed lifetime income.

AGILE is currently the only retirement income solution in Australia offering the unique combination of investment growth exposure, protection from market downturns, guaranteed lifetime income and flexible capital access.

Distribution appointment

Allianz Retire+ has also announced the appointment of Kiru Anantharaj as Senior Manager, Retirement Solutions, within its Distribution and Marketing team.

Kiru brings more than 20 years’ experience across insurance, advice, retirement and superannuation, and has a strong track record of building trusted relationships and delivering impactful adviser engagement. She joins from AMP, where she was a Retirement Specialist, and has previously held roles at Insignia Financial, MLC Life Insurance, BT Advice and ANZ.

Commenting on the appointment, Chief Distribution and Marketing Officers Catherine van der Veen and Lucy Foster, said Kiru’s experience and relationships would support the business in its next phase of growth.

“We are thrilled to welcome Kiru to the team at a time of strong growth for Allianz Retire+. She brings deep relationships across the advice community and a proven ability to support advisers in delivering better retirement outcomes for their clients.

As momentum continues to build in the retirement income category, strengthening our distribution capability is critical to ensuring more advisers and clients can access innovative solutions like AGILE.”

Commenting on her new role, Kiru said: “There is a growing need for solutions that give retirees confidence and flexibility, and advisers are increasingly looking for partners who can help them navigate this complexity.

“I’m excited to be joining Allianz Retire+ at such a pivotal time and to work closely with advisers to deliver better retirement outcomes.”

This appointment follows continued recognition of Allianz Retire+’s distribution strength, with Senior Retirement Income Specialist Lauren Matthews recently named BDM of the Year at the Financial Newswire Women Empowering Wealth Awards 2026.

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David Kane

As Anthropic expands into the Australian and New Zealand markets, leading Asia-Pacific data and AI consultancy V2 AI has built an enterprise-grade, intelligent AI solution, leveraging Anthropic’s Claude, that revolutionises how financial advisers engage with Allianz Retire+.

As a key Anthropic implementation partner, V2 AI is supporting a range of Australian enterprises across highly regulated industries to rapidly adopt Claude models to deliver unmatched speed, security, and scalable AI value.

The Allianz Retire+ Adviser Digital Assistant, or Ada, leverages Claude via AWS Bedrock, selected for its reasoning performance and assurance capability in regulated environments. The conversational tool transforms how financial advisers, paraplanners, and the financial services community engage with the Allianz Retire+ retirement income solution, Allianz Guaranteed Income for Life (AGILE).

From complexity to confident advice, accelerating the sales cycle

Understanding and comparing retirement solutions is time-intensive. Ada delivers contextual education precisely when and where it’s needed. It makes complex retirement income concepts more accessible, enabling self-paced exploration and empowering advisers to deliver better retirement outcomes.

David Kane, Chief Executive Officer, Allianz Retire+, said the AI assistant provides a user-centric experience built on enterprise-grade tooling with robust guardrails to ensure the highest standards of quality and accuracy.

“We’ve listened to advisers and recognised that for them to effectively solve for their clients’ retirement needs, they first need a frictionless way to master the tools at their disposal. Ada allows advisers to ask questions and receive robust answers within seconds, freeing up their time to focus on building better retirements for their clients.”

Anthropic expanding AI possibilities for Australian enterprises

Craig Howe, Founder and CEO of V2 AI, said that Anthropic presents an immense opportunity for Australian enterprises, with many V2 clients already experiencing the business benefits.

“Partnering with Anthropic at this pivotal moment allows us to bring world-class trusted AI capabilities to Australian organisations like Allianz and deliver significant business outcomes,” said Howe.

V2 AI’s experience spans the full Anthropic ecosystem, including Claude via AWS Bedrock, Claude Code, the Claude API platform and enterprise-wide adoption through Claude Teams.

In the energy sector, V2 AI is building grid-optimisation agents, automated customer billing optimisation, and anomaly detection systems to improve infrastructure resilience, customer experience, and safety. For the government, V2 is delivering agentic-based mainframe modernisation and regulatory knowledge assistants to transform public administration and improve service delivery.

These industry blueprints are designed to be repeatable, enabling rapid scale across enterprises in the region.

Scaling enterprise AI with confidence, speed, and control

V2’s experience, coupled with Anthropic’s technology capabilities, demonstrates how enterprise AI can propel businesses in regulated environments like financial services when compliance, legal, risk, product, and leadership come together. When organisational readiness meets clear AI strategy, governance and technical delivery, measurable value flows across the entire chain, from insurer to intermediary to customer.

Scaling Claude-based solutions demands a disciplined approach to responsible AI, where robust AI safety and assurance guardrails, such as evaluation with hallucination detection, human-in-the-loop escalation and regulator-ready audit trails are embedded from the outset.

V2 AI enables this through its proprietary Enterprise Velocity System, which combines AI technology with the governance, operating rhythm and delivery structures required to run an Intelligent Enterprise.

“Through our partnership with Anthropic, we aim to continue harnessing Claude to deliver consistent, high-quality solutions that help our customers not just adopt AI faster, but grow faster as a result. We believe this will establish a new standard for trusted, responsible and outcome-driven AI, supporting businesses across Australia and the broader APAC region to achieve significant business outcomes,” concluded Howe.

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Many retirees can afford a comfortable retirement – yet hesitate to spend, delay decisions or default to caution.

New research from Allianz Retire+ has identified decision inertia, driven by a powerful fear of commitments perceived as irreversible, as an emerging risk to retirement outcomes for otherwise well-prepared Australians.

Many retirees can afford a comfortable retirement – yet hesitate to spend, delay decisions or default to caution, according to a new white paper released by Allianz Retire+.

The behavioural cost of this inaction is clear across the Australian retirement system. Around 700,000 retirees leave their superannuation in accumulation after retiring, costing individuals up to $136,000, while around half of account-based pension holders withdraw only the minimum required, leading many to live more cautiously than their savings actually demand.

While many financial risks can be managed through diversification and portfolio construction, longevity risk remains fundamentally different. It cannot be diversified away within an individual retirement portfolio.

When retirees lack protection against the risk of outliving their savings, advisers are forced to manage longevity as a probability rather than a certainty, a reality that often drives underspending, heightened caution and lower confidence in retirement.

David Kane, Chief Executive Officer, Allianz Retire+, said advisers face a unique challenge when it comes to longevity risk.

“Longevity is the one major retirement risk advisers can’t meaningfully diversify away. While markets can be modelled and managed over time, traditional asset allocation strategies can’t insure against the risk of outliving your savings.

“Guaranteed lifetime income is not a product preference, it is a structural planning tool that helps advisers discharge their duty of care by securing essential income for life, and in doing so, gives clients the confidence to enjoy the years they can without fearing the years they can’t.”

The paper ‘The two-chapter retirement’ brings together a wide body of evidence spanning behavioural research, Australian and global retirement studies, economic data and adviser practice insights to explain this persistent disconnect. The paper synthesises this evidence into a single, coherent framework that reflects, generally, how retirees may actually think, feel and make decisions.

The ‘Two-Chapter Retirement’ framework highlights how many people experience their retirement journey as two psychologically distinct phases:

• an active, aspirational early chapter they can clearly imagine; and
• a later, more uncertain chapter associated with caution, fear and complexity.

Mr Kane added: “What we see is not the result of financial illiteracy or inadequate savings. These are clients who are well resourced and understand their position and yet are still reluctant to act.

“The constraint is behavioural, and no amount of additional information or projections are likely to help. Instead, advisers need a fresh approach which reframes levels of commitment and stresses the exit ramps in any retirement income strategy.

“The retirement system is getting more complicated, and many people aren’t aware of products that can give them guaranteed income. Combined with natural hesitation about large financial decisions, this is leaving many retirees unclear on their spending capacity and holding them back from plans that could help them enjoy the retirement they’ve worked hard for.”

These same patterns have played out consistently across decades of experience for Allianz in the United States at greater scale. In a 2024 survey by the Allianz Centre for the Future of Retirement, 85% of respondents said they find it easier to spend when they know their basic needs are covered, with 68% saying that the fear of unexpected expenses prevents them from wanting to spend money.

The white paper outlines the benefits of guaranteed income solutions, and the positive impacts for retirees when their advisers include these products as an option in their planning discussions.

“New-era retirement income solutions offer flexible access to capital and growth with downside protection not seen in older-style annuities.” Mr Kane said.

“Advisers who can help their clients distinguish between what is genuinely irreversible and what merely feels that way will materially shift their clients’ willingness to act, and will ultimately improve both their clients’ financial and emotional security.”

The ‘Two-Chapter Retirement’ framework represents a new paradigm for retirement planning. Recognising this two-chapter mindset is essential because it shapes how clients respond to advice, perceive risk and evaluate strategies from the outset. Viewing retirement planning through this lens allows advisers to better support their clients as they balance the desire to live well today with the need to secure tomorrow.

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Ada significantly reduces the adviser and paraplanner learning curve and product analysis process.

Allianz Retire+ launched a market leading Al powered assistant to transform how advisers engage with its retirement income solution, Allianz Guaranteed Income for Life (AGILE), empowering them to deliver better retirements for their clients.

What advisers have told us is that retirement solutions can sometimes be complex and time consuming to understand and compare. To bridge the gap in product awareness and make technical details more accessible, we have partnered with V2 Al, a leading data and Al consultancy, to create a market first in building an Al tool for financial advisers, paraplanners and the financial services community.

The Adviser Digital Assistant, or Ada, is an interactive, conversational Al tool designed to help understand AGILE in a simple, engaging, and intuitive way. Moving away from time consuming and dense documentation by creating a space where advisers can build knowledge on their own terms was our goal. Ada significantly reduces the adviser and paraplanner learning curve and product analysis process, delivering contextual education precisely when and where it’s needed, shifting adviser enablement from static learning to dynamic, embedded support.

Importantly, Ada is built on enterprise-grade tooling with robust guardrails to ensure the highest standards of quality and accuracy.

David Kane, Chief Executive Officer, Allianz Retire+, said: “Ada adds another market leading differentiator to our AGILE product.

“We’ve listened to advisers and recognised that for them to effectively solve for their clients’ retirement needs, they first need a frictionless way to master the tools at their disposal. Ada will allow advisers to ask questions and receive robust answers within seconds, freeing up their time to focus on building better retirements for their clients.”

“We appreciate the important compliance obligations associated with providing financial advice and have developed Ada with these in mind. Leveraging Amazon Bedrock, Ada is built on enterprise-grade tooling with robust guardrails to maximise accuracy and quality.”

Craig Howe, Chief Executive Officer, V2 Al, said: “Through our partnership, we have developed an enterprise-grade intelligent, Al-led solution that revolutionises how Financial Advisers engage with Allianz Retire+. Built as an AWS-native Al capability, Ada leverages the power of Anthropic Claude via AWS Bedrock, ensuring robust data security, seamless functionality, a user-centric experience,
and full control over its roadmap.”

The retirement income market is becoming increasingly relevant for Australians, however the complexity of traditional documentation and supporting materials can create uncertainty. Ada addresses a critical gap in the market by offering a dynamic experience to make complex retirement income concepts more accessible for advisers and their clients.

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Advisers need to be able to help their clients understand and navigate the six stages of retirement.

Retirement marks a truly significant transition in one’s life, representing the culmination of years of hard work, diligent saving, and careful financial planning. This period is far more than just the end of a career; it is a profound pivot point.

While retirement is often eloquently described as a journey, it is critical to recognise that this journey does not simply conclude with the cessation of formal employment. Instead, it evolves dynamically into a complex new phase of life that demands careful navigation to ensure a client’s continued wellbeing, fulfillment and importantly, financial security.

Beyond merely focusing on traditional investment and financial management, comprehensive retirement planning must encompass a broader spectrum of emotional, social and psychological considerations for each client. In this expanded context, the role of a trusted financial adviser naturally transcends traditional investment strategies and extends deeply into providing holistic support for the client’s overall life wellbeing.

As individuals initially enter retirement, they frequently find themselves grappling with a myriad of uncertainties and necessary adjustments. Pressing questions about future lifestyle changes, evolving health needs, maintaining social engagements, and, critically, their sustainable spending capacity, all demand immediate and focused attention.

In this unfamiliar and often challenging landscape, skilled financial advisers instinctively become trusted and indispensable guides. Their support spans from fostering a comprehensive understanding of all available financial resources through to providing crucial emotional support during these major life transitions. Advisers, therefore, play a pivotal role to empower retiree clients to lead genuinely fulfilling and self-directed lives.

Despite how it is often portrayed, retirement is anything but a single, monolithic event. Those who are actively living through it – as well as their financial advisers – know this reality. It has been established through research dating back to the 1980s^[1], and since ratified by more recent, thorough studies, that retirement comprises distinct and identifiable stages. Each one of these stages possesses its own unique characteristics, presents its own specific set of challenges, and requires a tailored advisory approach. Furthermore, the exact amount of time a client spends within any given stage is highly unique to them, varying significantly depending on a wide range of individual personal and financial factors.

The comprehensive cycle begins with the preparatory stage, known as pre-retirement, which leads into the second stage: the actual retirement event itself, whether that occurs as a carefully planned or an unexpected transition. This momentous shift is then traditionally followed by the initial honeymoon period of retirement, which can then give way to a period of disenchantment as the new reality sets in. This is then followed by a necessary reorientation period. Finally, the retiree reaches the settling stage, establishing a new sustainable routine and pace of life that will continue to evolve and adapt throughout the rest of their retirement years.

Stage one: Pre-retirement

The first phase in the retirement process, as identified by scholars such as Robert Atchley^[1], is the pre-retirement stage. This is far more than simply being the final years of employment; it is a vital, intentional period of transition where individuals begin the essential, gradual process of mentally and practically disengaging from their professional lives.

During this time, clients actively start to envision and map out their post-employment existence, moving beyond vague aspirations to taking concrete steps toward comprehensive financial, emotional and logistical readiness. A key component of this preparation often involves exploring formal strategies, such as a ‘transition to retirement’ strategy, designed to ease the shift from full-time work to a new life structure.

It’s also a time when clients may feel the first flutter of fear about their retirement funding. FORO – the fear of running out – is real. Years of inflation coupled with more recent market volatility have reinforced the notion that while people may live longer, there’s no guarantee their retirement savings will stretch that far.

Therefore, at this pre-retirement stage, your role as a trusted financial adviser is paramount. An adviser’s mandate is to guide their clients through a complex myriad of decisions, all aimed at laying the robust groundwork for a secure, comfortable and fulfilling future. This advisory work begins with a thorough and comprehensive assessment of the client’s current financial standing against their anticipated future retirement needs. This assessment must consider the specific income stream required to meet the client’s lifestyle objectives throughout what may be an extended retirement period.

A core component of your value here is to provide clients with an unambiguous and clear understanding of their financial position. By quantifying their current standing and projecting future requirements, you can empower your clients to make fully informed decisions and take proactive steps to bridge any identified gaps between their existing assets and their desired retirement lifestyle.

With increased longevity now meaning retirement may span twenty-five years or more, careful planning is crucial. To provide clients with a strong certainty of income across this extended duration, it is essential to lock down decisions about sustainable income generation during the pre-retirement stage, which includes a detailed consideration of the most suitable retirement income products.

For many clients, the focus shifts to ensuring reliability. Products that offer the certainty of a guaranteed lifetime income, ideally coupled with reasonable access to capital and some form of capital protection, can provide substantial peace of mind as they approach the official end of their working careers. You must expertly weigh the client’s risk tolerance, longevity projections, and income needs to select and implement solutions that maximise financial security while minimising worry. This income planning is the bedrock upon which the entire retirement structure is built, making this stage the most financially intense part of the advisory relationship.

However, the guidance offered in the pre-retirement stage extends far beyond pure financial planning. You can also assist clients to create a structured retirement master plan that intentionally encompasses not only quantifiable financial goals but also personal aspirations and desired lifestyle preferences.

This holistic planning might involve reviewing optimal healthcare and insurance options, as well as collaboratively devising plans for future leisure activities, extensive travel, or meaningful volunteer work. By delivering a tailored retirement plan that aligns precisely with each client’s unique needs and aspirations, you help foster a crucial sense of purpose and fulfillment in the pre-retirement phase, thereby ensuring a smooth, confident transition into retirement and laying the strongest foundations for a secure and satisfying future.

Stage two: The ‘Near’ phase

The Near Phase is the stage immediately surrounding the actual cessation of employment, often referred to as the ‘retirement event’. Ideally, this event is the culmination of years of planning and anticipation, signifying a significant and welcome life transition characterised by freedom and leisure. However, in less ideal scenarios, clients may be forced into retirement due to unforeseen and unplanned events.

Planned retirement

For clients with a structured transition plan, this phase involves finalising financial arrangements. This typically includes setting up income streams from superannuation funds and retirement income products to ensure the client’s desired lifestyle is maintained. Your guidance is essential here for factoring in critical risks such as inflation, market volatility, as well as longevity and sequencing risk.

Unplanned retirement

Unforeseen events can significantly impact a client’s readiness. Of the 156,000 Australians who retired in 2024-2025, 13 percent left work earlier than planned due to sickness, injury or disability and six percent found themselves retrenched or dismissed and unable to find alternative employment^[2].

Your role is critical when it comes to helping clients navigate these unexpected challenges. This involves providing guidance on contingency planning and evaluating appropriate insurance coverage. Clients benefit greatly from the early implementation of flexible retirement income strategies, which better position them for an unplanned exit from the workforce.

The retirement event brings a host of complex financial, emotional and logistical considerations. Beyond the technical financial strategies, you may find yourself providing emotional support and reassurance during times of uncertainty, helping clients adapt to their changing circumstances while staying focused on their long-term financial goals.

Stage three: The honeymoon period

The honeymoon period immediately follows the retirement event, marking a period of newfound freedom and intense relaxation where clients actively savour the fruits of their labour by engaging in desired activities. This period is often characterised by travel, hobbies and anything that brings your client enjoyment.

The duration of this phase is highly individual, potentially lasting anywhere from six months to several years, as each client’s unique experience and enthusiasm determine its length. Despite the initial euphoria and high activity level, this time requires clients to maintain a critical sense of financial stewardship to ensure their new, active lifestyle is financially sustainable over the long term.

Your strategic guidance is indispensable here; you can help clients enjoy this stage without inadvertently depleting their assets through overspending. A key action is to establish a sustainable spending plan that aligns their desires (discretionary spending on travel and entertainment) with their reliable retirement income, while firmly securing essential needs like housing and healthcare.

This period is also crucial for optimising investment portfolios to manage risk and returns, as significant market drawdowns early in retirement can severely jeopardise long-term financial outcomes. By providing this guidance, you enable clients to maximise their enjoyment and freedom while they are young and in good health, without compromising their future financial security.

Stage four: Disenchantment

Fortunately, this phase does not affect all retirees, but for those it does, it typically follows the initial excitement of the honeymoon period. This stage is marked by a letdown when the reality of retirement fails to meet earlier, often idealistic, expectations. Common symptoms include feelings of boredom, isolation, anxiety and disillusionment. These feelings are often provoked or exacerbated by financial concerns or the loss of the structure and social identity provided by work.

In this challenging period, your role often extends beyond financial oversight to become a holistic guide helping the client reconnect with purpose and stability. If a client does become disenchanted, a fundamental step is to initiate a comprehensive reassessment of the client’s current situation and their initial retirement goals.

At the same time, you can conduct an open and non-judgmental conversation to gain insights into the client’s sources of dissatisfaction. What is and isn’t working? Does the disenchantment stem from financial anxiety or non-financial factors?

This provides you with an opportunity to help your client readjust their priorities and expectations. This might involve revisiting the financial plan, adjusting the spending plan to alleviate monetary pressure or confirming that the current plan is robust, thereby assuaging anxieties. The goal is to move your client from generalised dissatisfaction to actionable steps.

Where disenchantment stems from a loss of purpose, you can facilitate solutions by exploring avenues for personal fulfillment and engagement that lie outside the financial portfolio. You could discuss potential structured activities such as a return to part-time work or consulting or pursuing volunteering opportunities that align with their personal values. Both options can help provide your client with a sense of meaning and contribution.

By encouraging clients to cultivate and maintain a strong sense of purpose and structure in their daily lives, you provide essential support that supports your client to transition out of disenchantment and move towards the next, more stable stage of reorientation.

Stage five: Reorientation

This phase follows the potential emotional dip of disenchantment. It is a period where clients, having recognised that their initial retirement assumptions or expectations were perhaps a little flawed, begin to construct a new, more realistic and satisfying lifestyle. This involves questioning their post-retirement aspirations and making deliberate lifestyle choices that align with their needs and long-term financial reality. While proactive engagement in comprehensive retirement planning well in advance of the retirement event can significantly mitigate uncertainty and facilitate a smoother transition into this phase, you can also play an important role in guiding this recalibration.

The core task during reorientation is helping your client cultivate a new sense of purpose and direction in their post-work life. You can do this by engaging clients in a deep exploration of their interests; the activities, relationships or causes that provide genuine meaning and fulfillment. Although this ideal exploration begins years before retirement, it must be revisited and adjusted throughout the retirement lifecycle to ensure the client’s current lifestyle remains aligned with their evolving personal and financial objectives.

By skilfully integrating financial projections to ensure sufficiency and sustainability with lifestyle preferences, you can assist clients to make informed, deliberate decisions that actively support their long-term personal and financial wellbeing and sense of fulfillment.

Stage six: Stability

Sometimes referred to as the ‘Routine Phase’, stability is the stage where retired clients finally settle into a predictable rhythm of life that reflects their preferences, interests and core values. For some, this routine is established soon after leaving full-time employment; for others, it may only solidify after navigating the other earlier stages of retirement.

This stage is typically the longest, often lasting many years, and provides your clients with the enduring opportunity to fully embrace the lifestyle they have worked to envision and create. Even during this settled period, your role retains importance. As clients become comfortable in their routines, their financial needs and priorities continue to evolve, even if only incrementally. Importantly, this stage often sees the emergence of health issues, which can necessitate a reassessment of living arrangements (such as downsizing or moving to aged care) and a significant adjustment to required medical expenses.

A thorough review of retirement goals, income sources and spending patterns is fundamental to ensure that each client’s financial strategies remain aligned with their long-term objectives. Regular check-ins allow you and your client to make necessary adaptive adjustments as new opportunities or challenges arise.

Whether your client decides to pursue a new, costly pastime, undertakes an extended travel plan, or is suddenly faced with unexpected medical expenses, you can offer the essential guidance and support to adapt the retirement plan accordingly, therefore preserving both the client’s financial security and their peace of mind within their established routine.

Ultimately, the stages of retirement confirm that retirement is a complex, multi-faceted journey, not a singular financial event. For the modern retiree, the financial adviser is far more than a manager of assets; you are a continuous partner in life planning. Your role will dynamically shift across the stages: from the crucial tactical setup of income streams and risk mitigation during the near and honeymoon phases, to acting as a vital sounding board during the potential psychological struggle of disenchantment.

You provide the necessary structure for successful reorientation, helping your clients to define new purpose and recalibrate their expectations. By ensuring that financial stability consistently supports evolving lifestyle choices and personal fulfillment throughout, you can provide your clients with the structure and objective guidance necessary to not just fund their retirement but live it with confidence and meaning.

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Notes:
[1] Robert C. Atchley, Retirement as a Social Institution, Annual Review of Sociology, Vol. 8 (1982)
[2] ABS, Retirement and Retirement Intentions, Australia, 2024-25 financial year, October 2025

This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This information is current as at December 2025 unless otherwise specified and is for general information purposes only. It is not comprehensive or intended to give financial product advice. Any advice provided in this material does not take into account your objectives, financial situation or needs. Before acting on anything contained in this material, you should speak to your financial adviser and consider the appropriateness of the information received, having regard to your objectives, financial situation, and needs. No person should rely on the content of this material or act on the basis of anything stated in this material. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material.

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Get better prepared for conversations with your Gen-X clients about the decumulation phase of retirement.

This year, the first of Gen X will turn 60. Over the coming decade, waves of Gen X Australians will join the baby boomers in enjoying a longer, healthier retirement than their parents and grandparents. Funding those years continues to be a source of concern for many as they approach this new phase of life.

Just in the last month, ASIC has once again criticised superannuation trustees for failing to effectively communicate with members about retirement. The regulator warned that many funds rely on generic, pre-retirement messaging and miss opportunities to provide meaningful support once members retire.

In its review, Report 818 – From superficial to super engaged, ASIC found a widespread lack of urgency in improving retirement communications, leaving many Australians without the information they need to make confident, informed decisions. With 1.5 million people already in retirement holding around $575 billion in super assets – and another 2.5 million expected to retire in the next decade – ASIC has urged trustees to prioritise more targeted, timely and member-focused communication strategies^[1].

When clients retire and their regular employment income ends, in an ideal world they should not have to worry about inflation, market volatility, or how long their savings will last. Nor should they face the fear of outliving their money and having to be reliant solely on the Age Pension to get by.

While super funds may provide foundational communication regarding retirement savings, the complexity and personalisation required during the decumulation phase demand a more tailored approach. You’re positioned to know your client and understand their short, medium and longer-term financial and personal retirement objectives. Given that at 30 June 2025, approximately 25 percent of Australia’s $4.3 trillion superannuation pool were  held in self managed superannuation funds (SMSFs)^[2]., it’s likely that a proportion of your clients are trustees of their own fund and will need even more comprehensive guidance when members reach the pension phase.

‘New era’ retirement income products

The OECD’s biennial report on the pension systems across OECD and G20 countries tells us that Australia has the world’s fourth largest retirement system^[3].. The Reserve Bank of Australia notes that our superannuation system sits at about 150 % of GDP and that projections have put the ratio as high as 244 % of GDP by 2061^[4].

Despite the increasing size of super retirement balances, research consistently shows that money worries are a leading cause of anxiety for older Australians^[5].. The biggest fear expressed by retirees is running out of money; either because they outlive their savings or because it’s eroded by external factors such as market volatility or inflation, both of which have been painfully evident for several years.

When soon-to-be retirees are faced with traditional retirement income products, there are generally tough trade-offs to be made between income certainty and flexibility. Many of those traditional retirement products, based on life expectancy, left nothing for the estate for those who died earlier than expected, or for those who enjoyed longer lives, no income support.

New era retirement income products have addressed these issues. Research has consistently shown that FORO (the fear of running out) is a major concern, but longstanding concerns around complexity, cost, flexibility and growth potential of traditional retirement income products has led Australians to eschew the sector in droves. Failure to utilise retirement income product may result in retirees ‘self-insuring’, living a frugal life to ensure they don’t burn through their retirement savings.

There is a better way, and it is important that advisers (and yes, superannuation funds) highlight both the progress retirement income products have made and the important role they can play in a well-rounded retirement plan. It also highlights the need for clear information and education to help your clients understand and make the most of these products.

New era retirement income solutions – such as guaranteed lifetime income solutions – can provide your clients with greater confidence about their future. Lifetime income streams function as a form of insurance against the financial risks of outliving savings.

By allocating a portion of a client’s portfolio to a new era retirement income solution, particularly one where the amount of income payable is guaranteed, you can provide your clients with the peace of mind that comes from the knowledge that their budgeted essential expenses will be covered regardless of market conditions. Some of these retirement income solutions also provide flexibility that allows for partial or full withdrawals to manage unplanned expenses or a change in circumstances, which importantly, offers adaptability in retirement planning.

Being well-informed is the key to help your clients to overcome misconceptions and foster a deeper understanding of the benefits such products can offer. Let’s address the top five misconceptions.

Misconception: Guaranteed lifetime income products are exceedingly complex

Reality: Advancements in user experience have – and are continuing to – drive simplification

Driven by rapid technological innovation and a stronger focus on user-centric design, today’s retirement income products are evolving towards greater simplicity and accessibility. The era of deciphering dense financial jargon is fading. Instead, new era products embrace intuitive design that makes them easier to use and easier to explain to clients.

Traditional annuities have long been burdened by complexity, but new era solutions prioritise clarity and customer experience. With straightforward features and transparent structures, they eliminate much of the confusion that once left advisers and their clients uncertain.

A key advancement lies in how product features are communicated. Clear explanations, short instructional videos, as well as interactive tools and calculators help demonstrate potential income outcomes. These resources not only enhance your ability to illustrate benefits to your clients but also empower your clients to make more informed decisions about their retirement plans.

The perception that guaranteed lifetime income products are inherently complex is quickly becoming outdated. By placing simplicity and usability at the forefront, modern retirement income solutions are setting a new standard for an intuitive and accessible retirement planning experience.

Misconception: Guaranteed lifetime income products are expensive

Reality: Product innovation, cost efficient structures and economies of scale provide more attractive pricing

The costs of new era guaranteed lifetime income products have steadily declined in recent years, driven by continuous innovation and more efficient product structures. By harnessing advanced technology and sophisticated financial engineering, providers have created solutions that are not only more streamlined and reliable but also significantly more cost-effective to operate.

Digitalisation has been a key catalyst in this transformation. Through the use of technology across product design, delivery and management, providers are achieving economies of scale that were once out of reach.

From automated processes to digital distribution channels, every stage of the product lifecycle has been optimised to reduce overheads and enhance efficiency. As the retirement landscape evolves, your clients can look forward to more affordable and accessible ways to secure the certainty of a dependable lifetime income. 

Misconception: Guaranteed lifetime income products lack flexibility and accessibility

Reality: Traditional annuities may lack flexibility and accessibility; new era products do not

Complexity alone doesn’t explain the historically low take-up of annuities in Australia. Traditional products have also been held back by rigid structures, limited flexibility, high costs and the inability to access capital when needed.

New era lifetime income products have transformed this landscape. They address the shortcomings of traditional retirement income products by combining the certainty of lifetime income with the flexibility to access capital. This offers your clients a compelling balance of security and control.

Unlike traditional annuities, investors no longer face an “all or nothing” decision between guaranteed income and liquidity. These modern solutions provide a dependable income stream in retirement while preserving the ability to draw on capital to meet unexpected expenses.

Flexibility now extends well beyond basic withdrawals. Many products allow your clients to tailor their income streams; to adjust payment frequency, incorporate inflation protection, or customise other features to suit their individual circumstances.

By combining reliability with adaptability, new era retirement income products deliver a powerful solution for clients seeking financial confidence without compromising access to their assets.

Misconception: Guaranteed lifetime income products have limited growth potential

Reality: Retirement income planning should (and can) include growth potential and protection

Retirement planning isn’t only about securing a steady income. It’s also about achieving the right balance between growing assets and protecting against downside risks. As your clients approach retirement, they face the dual challenge of building sufficient wealth to support their lifestyle while guarding against the uncertainties that can erode their savings over time.

Traditionally, investors have relied on growth assets such as equities and managed funds to build their retirement nest egg. While these assets offer strong return potential, they also carry significant market volatility risk, which can pose risks during the drawdown phase and threaten the sustainability of retirement income. Most of your clients will be all too familiar with that in the current environment.

Recognising the need for greater balance, some new era retirement income products integrate growth potential with built-in downside protection. By combining elements of both, they offer your clients the opportunity to benefit from market gains while reducing or even eliminating exposure to downturns.

As part of a diversified portfolio, these products can help clients maintain purchasing power, mitigate the effects of inflation and enjoy a reliable income stream – all with reduced volatility.

Retirement income planning no longer needs to be a trade-off between growth and security. With innovative new era solutions, investors can pursue both and achieve long-term financial confidence without sacrificing protection.

Misconception: Clients aren’t asking for guaranteed lifetime income products

Reality: When presented to clients, or when the question is reframed to specify guaranteed lifetime income, clients do want the features offered

Many of your clients will have a sense of what they want or need from their retirement income solutions, even if they can’t always articulate the specific features or benefits they’re seeking. Clients also tend to have a very clear understanding of their concerns.

A 2025 retirement readiness survey^[6]. identified the three primary factors that impact Australians’ readiness to retire. They are, in order of concern:

1. Inflation
2. The economy
3. Health care expenses

Research has consistently found that Australians favour flexibility in the early years of retirement, balanced by greater security in later years. This aligns closely with the principles of the Retirement Income Covenant, which aims to:

• Maximise expected retirement income
• Manage risks to the sustainability and stability of that income
• Provide flexible access to funds throughout retirement

However, it seems that a gap remains between retirees’ desire for income certainty and the explicit demand from super funds and financial advisers for guaranteed lifetime income products to address that desire.

A range of behavioural factors influence how individuals approach the decumulation phase. Inertia can lead investors to maintain the status quo even when better options exist, while present bias can drive short-term decisions at the expense of long-term security.

Despite these behavioural hurdles, evidence consistently shows that familiarity breeds confidence: as investors, advisers and funds gain a better understanding of the benefits of guaranteed lifetime income, their interest and adoption rates increase.

The key takeout is simple: the better informed your clients are, the more open they will be to solutions that meet their needs, both now and in the future.

Retirement planning can be complex, but challenging outdated perceptions and utilising new era guaranteed lifetime income products can give clients confidence. These products provide a reliable, sustainable income stream to support their desired lifestyle throughout retirement.

New era guaranteed lifetime income products represent a significant opportunity in retirement planning. They combine simplicity, affordability, flexibility and growth potential in a single, comprehensive solution. Advances in technology, innovative product design and a focus on user experience have made these products more accessible and user-friendly than more traditional retirement income solutions.

Not all income is created equal; designing a retirement portfolio requires an understanding of spending hierarchies and income sources, as well as an understanding of structures and solutions to deliver retirement income. These new solutions directly address many of the core challenges of retirement planning. They offer guaranteed lifetime income while providing opportunities for capital growth and protection against market volatility and longevity risk. By balancing growth and security, your clients can build wealth for retirement while mitigating financial uncertainties.

As awareness grows, more Australians are likely to recognise the value of guaranteed lifetime income products as a central component of a robust retirement strategy. With the right strategies in place, you can empower your clients to navigate the complexities of retirement with confidence and clarity.

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Notes:
[1] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2025-releases/25-235mr-asic-sends-clear-message-to-super-trustees-amid-glaring-retirement-communications-gaps/
[2] https://www.apra.gov.au/news-and-publications/apra-releases-superannuation-statistics-for-june-2025
[3] OECD Pensions at a Glance, 2023
[4] The Future Size of the Super Sector, RBA, December 2024
[5] R Dinham, ‘A close look at retiree fears and expectations’, Firstlinks, 3 February 2021
[6]  https://www.ssga.com/au/en_gb/institutional/insights/global-retirement-reality-report/bridging-the-confidence-gap-australia-snapshot

This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This information is current as at October 2025 unless otherwise specified and is for general information purposes only. It is not comprehensive or intended to give financial product advice. Any advice provided in this material does not take into account your objectives, financial situation or needs. Before acting on anything contained in this material, you should speak to your financial adviser and consider the appropriateness of the information received, having regard to your objectives, financial situation, and needs. No person should rely on the content of this material or act on the basis of anything stated in this material. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material.

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