How to use the TelstraSuper Retirement lifestyle planner

Welcome to our demonstration of TelstraSuper’s Retirement Lifestyle Planner. This is another tool that can allow you to estimate your final income in retirement that has a few differences from a lot of the other popular calculators, so I’ll show those to you as we go through.

The first page is probably quite familiar if you’ve used a calculator before. You simply need to enter your date of birth, gender, whether you’re retired or self-employed or still working, and your income. I’m just going to leave these as all the default options, but of course, if you use the tool, you would tailor it to your own circumstances.

You can also select the option to include a partner, which you should if you do have a partner, because it’s very important to plan together. It will impact your eligibility for Age Pension and of course, your total income. So it is very important to include their details if you are partnered. I will do that and again, just leave all the figures as the default, although I’ll put in some income for them to show that they’re earning the same as the first partner.

The next part of the calculator requires you to enter your superannuation balance, and it says your Telstra super balance, assuming you’re a member of the fund. If you’re not, that’s fine. You can still put in your total superannuation balance here, or if you prefer, you can click include my other super and make it clear that it’s in another fund. It won’t make a difference to the calculator’s output, so it doesn’t matter really which you do if you’re not a member of TelstraSuper.

Let’s for this person put in that they have a current balance of $100,000 in their superannuation. You can also insert here the contributions your employer is making. It’s assuming 11%, which is the required minimum, but you can change that if your employer is paying more. You can also change how frequently contributions are made. And if you’re currently salary sacrificing or making after-tax contributions, you would put that in here as well.

For the partners super balance, I’ll just put in again $100,000 just to keep everything even. And again, say that they’re not currently making any contributions to super. At the bottom here, you can add in more specific details about your personal circumstances and your plans. So if you’re planning to take a break from your career for a number of years, or if you’re going to have a career change that’s going to impact your salary, either up or down, and you know about that, you can insert that in here.

So I’ll show you what it looks like. You can add a career change by clicking this button. Select the age that you’re going to change careers, what your new salary will be, and so on. You can even add multiple career changes if you’re planning to change a few times throughout your life. You can also add a career break if you’re planning to take some years off. I won’t do either of those, but you certainly can do if that applies to you.

You can also put in here any other assets you have to fund your retirement, and the calculator will take those into account when estimating your retirement income for you. So to show you what that looks like, you can put in any shares or managed funds you have, and the calculator will assume that those will be generating dividends for you in retirement to contribute to your income. You can put in cash, which would generate interest that goes towards your income, or even an investment property, what it’s valued at and what your current rental yield is, so that the calculator can take into account that rent that you’re going to be receiving in retirement.

If you’re not planning to keep your investment property post-retirement, I wouldn’t put it in here because the calculator is going to assume that you will and you will still be receiving that rental income. So if that is instead something that you’re planning to dispose of and perhaps contribute the proceeds to super, you would instead put in that you’re planning to make a lump sum contribution to superannuation instead to account for that.

In this section for expected lump sums, it’s asking you if you’re expecting to receive a lump sum that you will be contributing to your super. So if you’re expecting a lump sum that’s going to be outside of super, that’s a different thing. This box is only for money that you’re planning to contribute into your superannuation.

Last of all, there’s also a box here for whether you should include the Age Pension, if you own your home, and what your other assets are. That’s critical to determine your Age Pension eligibility more accurately and work out if you’ll be receiving any Age Pension and from what age that will contribute towards your retirement income.

Once you filled in all of those sections that are relevant to you, you will click the next button and come to step two, which is about your goals. And this is where this calculator starts to get a little bit different. In the goals section, rather than simply just asking you what you’re aiming for and you perhaps sitting there and wondering how on earth you would figure that out, this calculator gives you some input into things that you may aim for.

So you can see here on this slide, it has the Age Pension amount that you would receive. So that’s what you would get if you had no other assets and you’re just relying on Age Pension in retirement. It also shows you the ASFA Modest Standard, which is based on having enough money to be above the poverty line, but not to afford anything fancy. So no overseas holidays and no new cars, no private health insurance, that thing. That’s the ASFA Modest Standard. The ASFA Comfortable Standard is what it sounds like more comfortable. You can have private health insurance, replace a car every five years or so, go on an overseas holiday every seven years, and a domestic holiday annually. If you’re interested, you can go to ASFA’s website and read more about those standards and how they’re calculated, but they certainly give you a good baseline understanding.

This tool also shows you where 70% of your combined salary would sit as a couple or 100% of your salary if you want to aim for those. Those are not numbers picked out of the blue. 70% of salary is quite popularly bandied about as being sufficient for most people. And 100% of salary is more where you might be aiming if you perhaps want a spectacular retirement or if you will be renting in retirement because rent adds a significant additional expense on top of the normal standards which are based on someone who owns a home. So 70% of salary or the ASFA Comfortable would be based on you owning your home and not needing to pay rent.

So you can personalise your target here using those standards or by clicking on this button here, which actually shows you both the ASFA modest and comfortable numbers for housing, electricity, food, and so on. And then you can put in your own number based on your real expenses. So if you haven’t made a budget or you haven’t in detail planned the income that you’re going to require for retirement, you can take the opportunity to do that here if you would like to by putting in these individual expenses to get a personalised outcome of what income you may be aiming for.

Let’s go back. And again, I’ll leave this as the default number just for the purposes of showing you how the calculator works. You can also then here add additional spending goals that you have above your normal regular income. So if you want to have a new car every five years or a holiday every four years or whatever it is, you can put those in here. So I’ll show you what the input looks like. If you want a holiday, you can specify how much you’re going to spend, whether that’s every year, every two years, or just a one-off, when you’re going to start doing that, and how old you’re going to be when you stop doing that. So they all look very similar to that. You can go into each one and add those in if those apply to you. But I’ll just remove that, and we can again click Next.

Now, here we are at step three, which again is different from a lot of our other calculators that you’ve probably seen. So you may have noticed there for a little while this graph was greyed out and the calculator was thinking for want of a better word. Now, that’s because because this calculator is what’s called a stochastic calculator. It’s a fancy word that really just means it’s taking into account a range of different possible investment returns and patterns of investment returns that could occur in your superannuation. So rather than assuming you just earn 7% every year, year in, year out, which is not likely to happen, it has within it a thousand different possibilities. And it’s actually running all of those scenarios in the background and then giving us, instead of just a figure that we can expect, it’s giving a likelihood that our retirement income will last to a predicted age.

So the default here is the highly likely setting, so 80% chance that your super is going to last you until you’re 92 in this scenario. You can actually change that. I won’t do it because it increases the complexity of the calculator, but you can do it up front in the assumptions, or you can do it here if you’d prefer to have just moderately likely or very highly likely output.

It’s not a promise that this is going to be what occurs. It’s just showing you a likelihood based on the average investment return of the option that it’s modelling and the variability of that investment return, so how volatile it is. And all that is built in to the background to give you this likelihood, which is far superior to just assuming you’re going to get seven or eight % every year, which is very unlikely.

The other thing that I’d like to show you here is where your life expectancy sits. So this box here is your life expectancy, 88, and then your super is predicted to last to 92. But this bar along the bottom also shows you the chance that you have of living to certain ages. So you’ve got an 80% chance of living to here and only 50% chance that you live beyond, say, 91. And that can give you some more information about how confident that you are your superannuation is going to last you for life.

Now, once you get to this point, it’s where you can start to compare with what if you did something different. So this is the situation if you do nothing and all of the inputs that you put into the calculator are as you say. Let’s make some changes here so we can see how this calculator really works in the next step.

I’m going to add in some contributions. So initially, we are not making any contributions in this calculator. I just wanted to put in 5%. And we’ll say that the partner also contributes 5%, and it will change the calculation in a dynamic way. We can also change our investments. So let’s say we do that, too. Before retirement, we’ll be in high growth instead of balanced, and that will make a difference to our predicted investment returns. We could also perhaps make a one-off contribution as well. So let’s say we are expecting that we’re going to receive an inheritance or we’re going to sell an investment property and put that money into superannuation. So we’ll say at age 60, we’re going to put in $150,000. That’s a lot, of course, but it’s going to make a big difference to the outcome. So I just want to do that so you can see the impact that these things will have.

So here you can see there’s this big jump in balance where we’ve put in that lump sum contribution. And the calculator has rerun its numbers and said, well, if we’re still only going to withdraw $70,000 a year or live on $70,000 a year, then now with all those changes, our super is likely to last until age 100 instead of age 92. Obviously an improvement.

So once you’ve made all those changes that you want to to your strategy, you can click next again and it shows you the final output. So this is This is the situation if we do nothing, if you’re not making contributions and you stay in a balanced investment option, the super final balance is predicted to be around this number and likely to last until 92. If we make the changes that we said, which are summarised here, then it’s instead likely to last until age 100. So it’s showing the contributions here that I put in and that I changed the investment option to high growth. So that is how that works.

You can also click here to print a PDF report. I’m not going to do that because it takes a little while, but you can click that and download or print that if you’d like to keep a record of your calculation. The last thing that’s important to note with this calculator is that it is assuming that you’re going to withdraw an account-based pension from your super, so that will still be exposed to market movements and fluctuations after retirement, and you’ll be withdrawing an income from that.

TelstraSuper actually have another calculator tool, though, that can model for you what your outcome might look like if you choose to take some of your super as a lifetime pension instead. Of course, if you take a lifetime pension, then your money is guaranteed to last for life, at least in that portion that you’ve attributed to a lifetime pension. So that’s really the next step after you’ve looked at this tool, is to take these numbers of what your final balance is likely to be, and you can then use that in the other calculator to model what the differences might be if you allocate a proportion of your final super balance to a lifetime pension instead of to an account-based pension. And we do have a video on that calculator, too, if you’d like to have a look at that one.

Before we leave this calculator tool, I will just show you the assumptions that you can change. So you can do this either at the beginning or any time during the tool. You can just click that Year button and say whether you want to include your Age Pension, how certain you want your outcome to be. So by default, it’s this highly likely option But if you’d like to be even more sure, you can have a 90% likelihood, or if you’re happy with a bit less certainty, you can look at a moderately likely outcome.

You can also change here the administration fees for yourself and your partner’s superannuation based on your real fees and your insurance premiums that you’re paying within superannuation as well. Those are the assumptions that are changeable for you. You can also have a look at this other tab. It tells you a lot more about how this calculator works. You can read about the stochastic approach, the investment returns that are used, how the contributions are modelled, and so on. So there’s quite a lot of detail there for you to have a look at for how this calculator works. I’m just going to close that down.

So I do encourage you to go and have a look at this and get that output from a true stochastic calculator, which are quite hard to find. I hope that this walkthrough has been educational and that you can get something out of using this retirement lifestyle planner.