In this guide
If you are ready to explore whether your super and other savings are on track for a comfortable retirement in the not-too-distant future, then your super fund’s retirement planning calculator is a good place to start.
These days, many super funds offer online calculators to help you work out your estimated retirement balance, the annual income it could provide including any Age Pension you may be eligible for, and when your super will run out.
This sort of information can be useful when you are doing your initial retirement planning, but the accuracy of these calculators is only as good as the information you put into them and the assumptions they use.
So how reliable are they?
Retirement projections vary widely
An extensive report by Super Consumers Australia (SCA) reviewed 22 super fund retirement calculators and found a disturbingly wide variation in their retirement balance projections, retirement income estimates and the age at which super runs out.
The September 2024 report reviewed websites of the largest 50 super funds (by number of members), but found only 25 had a publicly available calculator. Of these, three had the same generic calculator so it was only included once. Telstra Super was also excluded because its calculator uses a stochastic model which isn’t directly comparable to other models used (see note below).
A hypothetical scenario was then used to put the final 22 calculators through their paces – a single 50-year-old female with $55,000 annual income and a $95,000 super balance. She is a homeowner and plans to retire at age 67.
Key findings were:
- A large (42%) variation in projected retirement balance at 67, from $184,251 (Diversa) to $260,883 (Mercer), due to different assumptions about fees and returns
- An even larger variation (74%) in annual retirement income estimates, from $29,928 per year (Colonial First State) to $52,000 per year (Mercer and four other funds that use its calculator).
Strangely, there was no clear pattern linking low and higher balances with low and higher retirement incomes.
But a clear pattern does exist when it comes to when your money is likely to run out. Generally, the higher the annual retirement income, the sooner it is projected to run out and vice versa. Funds using the Mercer calculator all estimated the hypothetical female’s super would run out before age 92 (and as early as age 77, just 10 years after she retires). At the other end of the scale, 12 funds estimated her super would last until age 100+.
Before you start using an online calculator
As the SCA study shows, different calculators can give you wildly different retirement outcomes even when you plug in the same basic information about yourself and your financial position.
The difference is in the arbitrary assumptions most calculators make about anything from future investment returns to your retirement spending needs and your lifespan.
That puts the onus on you to read the assumptions and to understand the method used to calculate your estimated retirement income. That’s a lot to expect if you are simply after a quick back of envelope calculation, but it’s worth a bit of extra legwork in the long run.
Otherwise, you risk being overconfident about your estimated retirement income and running out of money too early. Alternatively, you may be overly fearful that your money won’t last the distance, so you decide to continue working longer than necessary or live so frugally in retirement your kids are the main beneficiaries of your super savings.
The following tips will help you understand how retirement calculators work and how to select one that’s appropriate for your personal situation.
10 tips for selecting a good retirement calculator
1. Check the assumptions and change where appropriate
It’s unlikely the default assumptions in your super fund’s retirement calculator will give you an accurate projection of your potential retirement income, so you may need to change the preset figures for a more personalised result. For example, you might want to retire before or after the default retirement age of 67 used by retirement calculators under ASIC guidelines.
You should also check that the assumptions are accurate and up to date. For example, if the calculator uses the ASFA Retirement Standard to estimate your retirement income needs, check that it has the latest quarterly update.
Assumptions about future investment returns are also an important consideration. The default setting may be a higher or lower rate of return than you are prepared to accept, or you believe is reasonable. If you alter the default rate, be realistic and set a rate in line with your risk profile and long-term returns from your chosen risk category.
Planned career breaks are also important to include, as missing out on Superannuation Guarantee (SG) contributions from your employer for several years will have a significant impact on your final super account balance and income in retirement.
If the calculator you are using does not allow you to alter assumptions that don’t reflect your personal circumstances, you should search for one that does.
2. Add the Age Pension
A good retirement calculator should create a retirement income projection that includes any eligibility for the Age Pension. Although this is slowly changing, most people still haven’t saved enough in super to fully fund their retirement, so they’re likely to receive at least a small part Age Pension – particularly in their later retirement years.
The best calculators often show a graph representing the income mix likely to come from your super account and any potential income from the Age Pension. The ASIC Moneysmart retirement planner gives you the option of including or excluding Age Pension entitlements.
Also check assumptions about the value of your personal assets because this could affect your eligibility for the Age Pension. Often a default amount of around $25,000 is included, which may not be appropriate.
3. Will you rent or own your home in retirement?
Most calculators assume you are a homeowner, which is a big assumption these days with over 20% of people over 55 renting. Renting in retirement will have a major impact on your weekly expenses, because rents increase in line with inflation and the cost of living.
SCA research found a single retiree renter on a low income aged 65–69 will need almost 30% more income in retirement (or have saved 110% more) than a homeowner in order to maintain a similar standard of living.
Even if you do own your home, more Australians are retiring with mortgage debt and plan to use a lump sum from their super to repay it. This would obviously have an impact on the amount of super left to convert into a retirement income stream. Yet 73% of computers failed to ask people if they have any outstanding mortgage.
Look for a calculator that asks if you plan to rent or expect to have any outstanding mortgage when you retire
4. Consider assets outside super
Earnings on any investments you hold outside super could be an important component in your retirement income, but not all super calculators give you the option to include them.
Although younger savers may have limited assets other than super, older or wealthier people often have significant non-super assets such as term deposits, shares and investment properties.
5. Don’t forget fees and insurance premiums
The administration fees and insurance premiums paid from your super account can be a significant cost, so it’s worth checking the assumptions of the calculator you are considering. Often fees are assumed to remain constant over the projection period, while some calculators allow you to alter these fees within certain ranges.
Retirement calculators also usually assume you will pay a steady premium for the insurance cover provided by your super fund every year until retirement. A common default setting for insurance is the cost of basic cover for TPD and income protection for a member aged 40, but this may not reflect your personal circumstances. This cost may be too expensive for younger super fund members and too cheap for older members who face higher premiums as they age.
6. Take your partner into account
Not every retirement calculator allows you to include information about your partner’s super and their planned retirement date. Many assume both partners will retire at the same time, which often isn’t the case, particularly if they are different ages.
Two people generally live more cheaply than one, so make sure the calculator you use allows you to enter detailed information for both partners as this can make a big difference to your retirement income.
7. Work out your retirement income budget
One of the difficulties of retirement planning is working out how much income you will need to live on in retirement.
Simply calculating how much annual income your projected super retirement balance will provide won’t tell you whether that level of income will be sufficient for your needs or desired lifestyle. To answer this question, you need to work out your retirement budget, including likely expenses and spending. Unfortunately, few calculators offer any help with this.
Alarmingly, the SCA study found only one calculator tested (AMP) asked people to enter a detailed budget. It concluded that most calculators rely on arbitrary assumptions about a person’s spending needs and don’t provide any assistance or guidance (such as a budget template) to help people work out a personal income target that is appropriate for their circumstances.
Roughly half of the calculators tested used a replacement rate of default retirement income, ranging from 60% to 80% of pre-retirement income, or $29,928 to $38,500 for their hypothetical single woman. While this was more personalised than the ASFA comfortable budget of $52,000 per year used by roughly one in five of the calculators, it resulted in severe underspending for the study scenario and, in the case of one calculator (AustralianSuper), a significant balance remaining at age 100!
Most calculators also fail to explain minimum withdrawal rules. This is most problematic for low-income earners who may need to increase the default replacement rate of income ensure they meet the regulated minimum annual withdrawal.
8. Consider your longevity risk
The best retirement calculators can also provide useful information on your chance of living to a particular age. For example, the projection will show your remaining retirement income at a particular age and that the probability of you still being alive at that age is 80%.
This information is based on the Australian Life Tables compiled by the Australian Government Actuary. It shows average lifespans from your current age so you can see how likely you are to outlive your super savings.
9. Trial scenarios and stress testing
Other interesting calculator tools allow you to trial different ‘what if’ scenarios, such as what will happen to your retirement balance if you change variables like your retirement age or personal contributions.
Some calculators also allow you to ‘stress test’ your retirement savings in different investment scenarios. These types of simulators can show how up to ten different market scenarios would affect your retirement savings over time, with the projected retirement savings levels automatically adjusted.
10. Compare results from several calculators
As you will have realised by now, different calculators may provide wildly different retirement outcomes for the one person, so it pays to test drive a few.
We’ve done just that, so check out SuperGuide’s video tutorials on some of the best calculators currently available. Sadly, few super funds provide a tutorial on their own calculators.
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