There's such a thing as too much caution. Older Australians could enjoy far higher standards of living and could cut their reliance on the aged pension if they just ate into just a portion of the $1 trillion tied up in their homes, a new Productivity Commission study has found. 
But it says few of them are interested.
Contrary to the myth that retirees fritter away their superannuation lump sums in order to get the pension, the study finds that most are too cautious with their money, engaging in too much "precautionary saving" and dying with their houses and savings intact.
"When faced with lower incomes, older Australians are more likely to cut expenditure than draw down on their wealth, Productivity Commissioner Karen Chester said. "This means not accessing the wealth embedded in their family home."
Entitled Housing Decisions of Older Australians, the report includes the results of a specially commissioned survey of 1500 older Australians. Only 15 per cent expect to downsize to smaller homes while only one to 2 per cent used reverse mortgages to tap into the value of their homes.
Downsizing is difficult, and not necessarily affordable. Those that try run the risk of losing some of their pensions if the transaction makes them money.
Many over 60s continue to save throughout their retirement, even when their only income was the pension, and even near the end of their lives.
Around 40 per cent of single pensioners and 33 per cent of couples live on less than the Association of Superannuation Funds of Australia benchmark for a "modest lifestyle", suggesting that the benchmarks are too high.
The study finds that the greater availability of in-home care is turning residential aged care into "end of life service". The typical admission age is 83 years and climbing, with average tenure only two to three years.
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