The Moneysmart Retirement Planner is a powerful calculator developed by ASIC. At SuperGuide we use it in many of our articles about retirement income but we highly recommend that SuperGuide readers use the calculator themselves to tailor more specific projections.
The calculator allows you to specify your age, income, super balance, and desired retirement date (and also the same details for your partner) and can give you an estimate of how much super you are projected to have at retirement, and the level of income it could provide you.
We are big fans of the calculator because it allows for the Age Pension (and you can also specify if you are not eligible for it), and lets you change assumptions around factors such as investment returns, fees, and insurance.
You can also see the impact of making additional super contributions or changing how long you would like your super to last for.
It’s not perfect and should not be completely relied on as a prediction of what your retirement income will be. Some of it’s drawbacks are that it only allows for a flat level of income and contributions. You cannot for example add an inheritance or only add additional contributions for a short period of time. It also assumes your investment returns will be consistent every year – there is no option to ‘stress test’ the outcomes by including variability of returns.
It is very useful though as a way to get a general feeling for how much you broadly need to save to generate a particular level of income. It also can give you a better understanding of some of the key factors that make a difference in boosting your super balance.
There can be a bit of a learning curve with the Retirement Planner, and it may appear intimidating at first glance, so we have created a short video to help you get an understanding of how the tool works. We hope you find it useful, and it inspires you to try the calculator for yourself.
Hi, I’m Kate from SuperGuide. Let’s take a look at the Moneysmart Retirement Planner. This is a calculator that allows you to model your retirement income, including what you would receive from your super and also the Age Pension. It is relatively straightforward to use, but it also has a lot of features that you can tailor, and that does add complexity. Hopefully, this walkthrough will allow you to make the most of it.
First of all, let’s look at the basics of how the calculator works. You just need to insert your personal details. We’ll click on someone who’s 50, earn $70,000 a year, and would like to retire at 67, which is the age you can begin to receive Age Pension. Here we put in their super balance. Let’s use $200,000. And the calculator also assumes that you receive contributions from an employer at the rate of 11 %, which is the standard super contribution. If your employer contributes more, you can change that figure. Or if you’re self-employed, you can reduce it down to zero to reflect that you don’t have an employer making contributions for you.
We can now scroll down to see the results. First of all, the calculator shows you the result by income. In this particular case, around $53,000 per year until the age of 92 for this individual. The calculator, by default, models up to the age of 92. If you want to model to a different age, that’s one of the things that you can tailor in this tool. It shows you here both your income from your super and from the Age Pension. So this dark bar is the Age Pension and the lighter bar is the super.
You can see at the beginning, the contribution from Age Pension is quite small. And as the person ages, the amount of Age Pension they receive increases. This is a typical pattern because as your assets reduce, the means tests that are used to calculate your Age Pension entitlement become more generous. You have fewer resources yourself, so you receive more support from the government as you age.
If we scroll down further, I can show you how to tailor the results. And it’s in these Advanced settings sections. So first of all, we’ll look at the Advanced settings for You. Here you can see that you can change the fees that you pay on your superannuation and also the investment return that you receive.
So here we’re set at the default fee level, but you can change this to Other and everything will reduce to zero. Now you can put in the real fees for your superannuation fund.
Let’s say the administration fee is $65 per year. This section says Indirect cost ratio, but you can actually put in here any fee that’s a percentage-based fee that’s deducted from your account balance. It doesn’t have to be indirect costs. So we’ll leave this one at zero. Many funds only charge just a flat administration fee and no other fees out of the account balance. If yours does charge a percentage administration fee, you would put it here.
Again, you can change the fees after retirement, and this is the fees that would apply to the pension account that you plan to commence with whichever super fund you want to choose. So you can put in here the fees that you’d be paying for that.
Then we have the Investments. Again, it has a default in here of 7.5% return before retirement. You can change that if you’re in a investment strategy that would be expected to have a different return. So again, we can select Other. Perhaps we say that our return is 8%. And this is the return before fees. Because you can see here, the calculator is asking you to put in the investment fees. Now, when your super fund declares to you their investment return, if you receive your annual statement and it says you earned 8% this year, that’s actually after fees have come out.
So there’s two ways to use the calculator here. You could just put in your estimated investment return after fees, perhaps based on what your fund has achieved on average in the last 10 years, for example, and you could then leave the investment fee as zero. Or you could put in what you think a realistic investment return is before fees from the type of strategy that you’re investing in, and then put in the real fee. Either way, the result should be relatively similar.
I’ll put in here an investment fee of 0.7%, which is relatively typical. In terms of tax on investment earnings, again, this is not something that you see. Your super fund statement return is already after tax, so you could leave that as for simplicity if you wanted. To make it very realistic, I might put in 7%, which is the average tax on earnings that the Retirement Income Review in 2020 found that super funds tended to pay.
Now, after retirement, again, you can change your investment. So it would be quite common that after retirement you might have a more conservative investment strategy on the whole, although that doesn’t apply to everybody. So you can put in here what your expected return would be after retirement. Let’s say 6.5%. There’s no tax here because there’s no tax on earnings in the retirement phase, and the calculator knows that, so it leaves that out. But again, you can put your investment fees in. Let’s use 0.7% again, the same as before.
Now again, you can do even more tailoring. So if you’ve got an advisor attached to your account, you can add their service fees in here. You can also put in insurance premiums. Let’s assume this person doesn’t have any insurance in their super, so they’re paying zero. You can also put in advice costs after retirement as well.
Now this last little button might seem like it can’t be important, but it’s actually critical to the results that the calculator produces. So let’s have a look at what’s hidden behind this drop-down box. Here we’re looking at the assumptions that the calculator uses for inflation and wage growth.
Now, inflation is used to deflate the income estimate that the calculator is giving you. Because if you are, say, very young, say you were 20 years old using this calculator, without taking inflation into account, it might tell you that your final retirement income could be $150,000, which sounds like a lot in today’s money. But in 40 years or 45 years, when a 20-year-old person is retiring, that amount of money won’t buy the same amount at the supermarket or even in terms of rent or property because of inflation. So the inflation number is used to deflate your future retirement income into today’s dollars and make it much more understandable for you.
Wage growth is also important because it’s assuming that your wage is going to grow at that rate and the employer contributions that your employer makes are going to go up in line with that. It’s also important in the post-retirement phase because the Age Pension is indexed to wage growth if that’s higher than inflation. In reality, over the last decade, wage growth hasn’t been anywhere near 4%. This is a feature that you might like to edit if you want to make the wage growth number more realistic.
I’m going to do that because in the last decade, wage growth has been more like 2.5%, not 4%. Perhaps that will improve in the future, we can always cross our fingers. But I’d like to show you the impact that editing that can have.
Now here again, we have more options to give the calculator information about ourselves. Do we want to include the Age Pension? Yes or no. You would select no if, for example, you know that you wouldn’t be eligible for Age Pension. Perhaps you won’t have been an Australian resident for long enough by the time you retire and you won’t be eligible, you could change that to be No.
It also asks if you’re a homeowner because that has an impact on your Age Pension assessment, and it asks about your assets outside super because again, those are important in the Age Pension means tests.
Now here you can also put in if you are going to have a one-off expense after retirement, perhaps to pay off the mortgage or make a large purchase. And again, you can tailor the age when you’d like your super to run out. I’m going to leave it at 92 just so that we can see the impact of just the changes that I’ve made to the assumptions so far.
If we scroll back to the income estimate, you can see that it’s now changed to just over $54,000 because of the changes to our assumptions. That was because I changed the fees and the investment returns that are going to apply for individual.
If we go back down again to the very bottom, we can change that age. Let’s say they wanted instead this super to last until 102. Perhaps long life runs in your family. If we go back up to the top again, we can see that that’s reduced the estimated retirement income, of course, because you can’t afford to draw as much out of your super if you need it to last for longer. So that’s reduced the retirement income.
The other options to tailor the calculator are back up at the top. So here we can add in variables like whether we make additional contributions and whether we take any time off work. So let’s do that. If you would like to see the impact that additional contributions could make, you would select Yes here and you can then put them in. That’s also what you would do if you’re self-employed and all your contributions are coming from yourself. You would change this employer contribution to zero and put in any contributions that you make voluntarily as these additional contributions.
And there’s lots of options here to choose how you contribute. So it should be tailorable for everyone. Let’s say this person puts in a dollar amount monthly of $200. And that’s a before tax contribution, so a salary sacrifice. They don’t make any after tax contributions at all. So that $200 a month, let’s see what it’s done to the retirement income. It has changed it a little bit. If the person was younger, it would change it by even more because there’s more years for that contribution to accumulate.
You can also put in career breaks. So let’s do that. If you say Yes, it will ask you to put in a reason for the change. That’s just for your own information. You don’t have to put in anything there. You can choose when the change will start and when it will finish. Let’s say this person is planning to take a year off in 2024. We would say that leave commences on the 1st January and ends on the following 1st January. They’re going to receive 0% of their income during that time because they’re just taking a year off.
Perhaps that could be for caring for an elderly relative, maybe it’s raising a child, looking after grandchildren. It doesn’t matter what it is. If for any reason you’re planning to take some time off work, this is how you can edit the calculator to take that into account. So again, here we can see that that’s changed the result a little bit by taking a year off.
Let’s now take a look at how we can include a partner. To do this, we need to go back to the top of the calculator. And if we take a look at this relationship status box, you can see you can change it to being a couple. This will cause a few more boxes to pop up further down the calculator where you can fill in your partner’s personal details and get a model for the two of you as a unit. If we scroll down, you can see here we now have this section that wasn’t here before. It says About your partner. Let’s say they’re also age 50, have the same sort of salary, and also want to retire at the same age. We can also put in that they have the same super balance just for the sake of fairness.
So if we scroll down now, you can see that the results of the calculator look a little bit different. It’s got some more bars here because it’s showing income from your own super, from your partner’s super, and the Age Pension. You can see now that at first this couple are receiving only income from their super and zero Age Pension. That will be because their accumulated super at retirement is too much to qualify for any Age Pension. You can see it starts to kick in though, at age 72, just as a very small Age Pension, and then builds over time.
This is actually a really important reminder that after you have retired, it’s really critical to keep on top of your financial situation and continually check to see if you’re eligible for any Age Pension. Because no one is going to come and alert you, it’s up to you to go and apply to Centrelink to receive your entitlements when they fall due. You can see that model following through, again until age 102 now, because we already changed that earlier in the assumptions. So this couple is looking at a healthy retirement income of $77,000 a year combined until they’re 102. They might be very happy with that outcome.
There is another way that you can view the results of the calculator, though. It shows you an income by default, but if you’d rather view the lump sum balance that you’re going to end up with, it can do that as well. So you can use that little drop-down here to change that and view instead your superannuation balance and how it will decline over the years as you draw money out of it. Now, what’s really important to remember with this calculator, and lots of retirement calculators and financial calculators in general, is that they tend to assume that you receive the same investment return every year, year in and year out. Now, of course, that’s not particularly realistic. Investment returns vary considerably from one year to the next. Some years they can even be negative, depending on how you’ve got your money invested.
So it is only providing a very simple model, but the calculator is free, and you can take it with a grain of salt. It’s only an estimate, it’s a ballpark, it’s not a promise. So it’s really important that you take into account the variability of investment returns can have a really large impact on what your actual retirement looks like.
There are some retirement planning calculators available that allow you to take into account the variability of investment returns, so you might like to have a look around for those as well once you’ve used the Moneysmart tool.
I hope that that has been helpful to you and that you can now get started to look at the Moneysmart Retirement Planner and see what your own retirement income may be.