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Calculators that offer to predict your final super balance and retirement income are readily available through most super funds as well as ASIC’s Moneysmart service. If you’ve done any planning for retirement, you’ve probably used at least one.
Why try another? It’s always worth reviewing your progress, and the Retirement Lifestyle Planner by TelstraSuper has some features that set it apart from the crowd.
Results based on probability
Most projection tools assume your balance will receive a fixed investment return each year. The results of such a projection are not very reliable because real investment returns vary each year, often by a large margin.
TelstraSuper’s planner instead uses a ‘stochastic’ approach, modelling 1,000 random possible sequences of investment returns. The sequences are generated based on the average annual return of each option as well as expected volatility (how widely returns typically vary from the average – or the standard deviation for those of you who remember your high school mathematics).
The modelling is used to calculate the age to which your retirement income is expected to last, with your chosen level of certainty. You can choose to calculate 70%, 80% or 90% probability, depending how confident you would like to be that your retirement goals will be met.
For example, if the modelling shows that you can be 80% certain your chosen level of income will last until age 88, this means that in 800 of the 1,000 modelled scenarios, retirement income lasted to age 88 or beyond.
The stochastic nature of the calculation means results should be closer to real-world outcomes, which can provide you with more confidence in your retirement plan.
Guidance on retirement income needs
To interpret the results of a retirement calculator, you need to know what annual retirement income would make you comfortable. Many tools simply display your estimated income or require you to insert your desired income level without guidance, leaving you in the dark on how to choose the income that will suit you.
TelstraSuper’s tool instead displays some possible target income levels to guide your hand – the ASFA modest and comfortable retirement standards, as well as 70% and 100% of your current income. There is also a simple budget tool you can use to input what you expect to spend in a range of categories, to tailor your target income more precisely.
There is even the option to add one-off expenses you expect to incur in addition to income needs, such as holidays, new cars and home renovations.
More detail about life expectancy
While many tools display your life expectancy, the Retirement Lifestyle Planner does more by displaying the ages to which you have 80%, 50% and 20% chance of living.
This gives you more guidance about how likely it is you could outlive your retirement savings.
How to use the calculator
We know how important it is to feel confident you can easily navigate unfamiliar tools, so we have put together a video demonstration. We trust that it will help you to access all the features on offer and generate an informative projection to help your retirement planning.