Choosing the right retirement income calculator for your needs

So many retirement calculators, and so many confusing results. Why do online superannuation calculators, each provided with the same information, arrive at wildly different outcomes?

A quick online search will bring up many free retirement and superannuation calculators from the Australian government and private sources, but how do you know which is right for your circumstances and which to trust? Are online calculators even regulated and do they take your Age Pension eligibility into account?

These are all good questions that many retirees ask when it comes to estimating their potential retirement income and how long it will last, and it can often be difficult to find a straight answer.

So, we’ve demystified the issue below – but it’s important to keep in mind that calculators make differing assumptions and that tweaking these default assumptions can make a huge difference to your retirement income projection, so it’s best to talk to a financial adviser if you want to ensure a forecast is tailored as closely as possible to your individual circumstances.

First, let’s look at some of the available Australian retirement calculators and how to use them, whether you’re coming up to retirement or managing your finances in your retirement years.

Retirement income needs

With good health in older age becoming increasingly common, many people will need to budget for well over 20 years of retirement. That’s why it’s best for most people to forecast their required income in stages – because needs change over 20 years or more. As we age, some of us may spend less and therefore require less income.  Travelling across the country or overseas may be a priority in early retirement, but in your 80s or 90s, perhaps not so much. Instead, you may need some help to live at home or have to move into a retirement facility.

Before using an online calculator, get a fix on your core expenses, listing everything you can conceivably think of.  Start with basics such as groceries, rates, water, electricity and gas, clothing, medical and dental treatment, internet, phone, insurance, rental payments, car registration, and running costs. Don’t forget extras such as membership or exercise group fees or allowing for a holiday or travel.

Next, try to anticipate how your needs could change at different retirement stages. It’s wise to overestimate future expenses to protect yourself from rising living costs and life’s little surprises. For example, have you budgeted for aged care, or your funeral? When will you clear mortgage repayments or any debts? Even if you don’t plan to trade up your home or vehicle pre-retirement, allow funds for maintenance and repairs.

Industry SuperFunds’ retirement needs calculator makes setting out these expenses, and thus forecasting your retirement income needs, easier because its forecast is based on pre-set lifestyle costs. If you’d prefer to input your own specific figures, UniSuper’s budget calculator is broken down into the major expenditure categories and lets you put in exactly how much you anticipate spending on each.

Retirement income forecasts

Once you know what level of income you’re likely to need, it’s time to look at calculators whether you’re on track to be able to create that income from your existing super savings and the Age Pension.

The Australian Securities and Investments Commission’s (ASIC) Moneysmart site has a retirement planner that will help you work out your potential income depending on the age at which you plan to retire. It shows you how your super contributions, investment options, fees on your super fund, and your retirement age will all impact your potential income from super, and how being a part-time worker or having a break from work will affect it as well – so you can create a pretty accurate picture of what kind of income you’ll have at retirement if you make no changes to your current plans and also how that income may increase or decrease depending on the actions you take leading up to retirement.

Industry Super Fund’s retirement balance calculator, meanwhile, is another calculator that projects how much income you could receive when you retire, based on your current super balance and contribution plan. It also shows you how making even just a small additional super contribution each year can make a huge difference to your lifestyle in retirement.

Retirement income longevity

Knowing how much you need and want to spend in retirement, and whether you’ll have the money to do so, are the first two big questions about retirement income answered. There is a third, though; how long will that income last? A longevity calculator works out just that.

A well-known industry calculator is Mercer’s retirement income simulator, which helps you calculate how long your super balance will last at your current and future income rates (you can change these to change how long it forecasts your money will last), factoring in investment returns and inflation rates. It also takes into account what your pension entitlement may be, based on current eligibility rules and the information you input on your age and salary.  (Mercer is a large actuarial consultancy, which means it specialises in understanding mortality rates and their impact on financial matters.)

Noel Whittaker’s retirement drawdown calculator is another choice to help you to get an idea of how long your investment portfolio will last after you retire, depending on how much you withdraw as income each year. You can use this calculator on any type of asset that you hope to produce an income from, because it allows you to input specific rates of return.

Account-based pension calculator

If you plan to use one of the most common retirement income products, Moneysmart’s account-based pension calculator helps you work out how long your super balance will last, plus how fees and investment returns affect your balance. (Also known as an allocated pension, an account-based pension is a regular income stream that you can create after you have reached ‘preservation age’, and is set up using the funds you have accumulated in super.)

The results are modelled on the information you provide and assumptions about your retirement influenced by your future circumstances, life events, your Age Pension, your portfolio’s earning rates, tax, and inflation. The results are in today’s dollars, adjusted for inflation.

While working out a realistic picture of your future expenditure and retirement income, and how far your income will stretch, can be confronting, discovering that your retirement balance isn’t sufficient to retire on is usually even more distressing.

However, the advantage of using online calculators to model your finances is that they allow you to model how making changes, such as retiring later, increasing super contributions, reducing the fees you pay on your super fund, or choosing a fund that makes a better rate of return, can improve your retirement income. That way, you can make more informed decisions for your retirement years.

* This story was originally published on October 4, 2019, information was updated on April 27, 2023

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.