Money

Plan for retirement – how it works

Published on November 7, 2016 10:11 pm, by

Planning for retirement can be difficult. There is a bewildering array of superannuation options and rules to consider and that’s before trying to figure out how much money you need to support your retirement plans.

MoneyBrilliant’s Plan for Retirement feature helps you estimate the value of your retirement savings. In the simplest case you can just connect your Super accounts, enter details about how your super is invested, the contributions you plan to make and when you plan to retire. We’ll do the rest by projecting this forward and estimating how much you’ll save. We’ll use reasonable assumptions to create the estimate for you, but you can change these if you want to fine tune the estimate.

When we calculate your estimated retirement savings we’ll also apply all of the rules and regulations about how super works. We’ve summarised the key ones below to help you understand what’s going on behind the scenes.

Remember, the estimate we provide you is just that – an estimate. It’s not a prediction and it doesn’t take into account your personal circumstances or objectives. If you want help you should consider seeking advice from a licensed financial adviser.

Your date of birth
Your date of birth drives a number of aspects of the Plan for Retirement calculations. First it influences your default retirement age. We set your default retirement age based on superannuation regulations that set your ‘preservation age’ which is the age at which you can usually access your superannuation savings. Preservation age is gradually being increased so the younger you are the older your default retirement age will be. But of course you can decide to retire at any age – you just probably won’t be able to access your super until you reach your preservation age. So if you plan to retire early, or you want to work longer and save more in super go ahead and adjust your retirement age.

Your date of birth also influences your estimated life expectancy. Generally the younger you are the longer your life expectancy as health and medical science increase how long we can expect to live. We estimate your life expectancy based on standard life expectancy tables available from the Australian Bureau of Statistics. But you can change this too, so if you want to live longer than average, or you feel like you days are numbered, go ahead and change the estimated life expectancy.

Your gender
Your gender influences your estimated life expectancy, with women generally living a little longer than men. We estimate your life expectancy based on standard life expectancy tables available from the Australian Bureau of Statistics. But you can change this too, so if you want to live longer than average, or you feel like you days are numbered, go ahead and change the estimated life expectancy.

Your retirement age
We default your Retirement Age to your superannuation preservation age – which is usually the age at which you are allowed to access your superannuation savings. Preservation age is gradually being increased so the younger you are the older your default retirement age will be. But of course you can decide to retire at any age – you just probably won’t be able to access your super until you reach your preservation age. So if you plan to retire early, or you want to work longer and save more in super go ahead and adjust your retirement age.

Your life expectancy
Your life expectancy is important so you have an understanding of how long your retirement savings will need to last. We estimate your life expectancy based on standard life expectancy tables available from the Australian Bureau of Statistics. But you can change this too, so if you want to live longer than average, or you feel like you days are numbered, go ahead and change the estimated life expectancy.

Your Gross Annual Salary
Your Gross Annual Salary is used to calculate part of your superannuation contributions. Your employer or superannuation guarantee contributions

Employer Contribution
Your employer contribution, SG rates etc

Main Super Account
Your main super account is the account we assume you continue to receive contributions into.

Super Investment Option
Your Super Investment Option is how the majority of your superannuation is invested. You can select from a number of standard investment options that have been pre-configured with reasonable investment returns, taxation rates and fees and charges. You can also select the Custom option to enter your own Investment Return, effective tax rate and fees.

Custom Investment options

If you select the Custom investment option you will be required to enter your own annual Investment Return, effective tax rate and investment fees. If you select a Custom investment option we will use the information you provide to calculate your estimated retirement savings.

Contributions

In addition to your employer or superannuation guarantee contributions you can specify additional contributions you plan to make to super. These additional contributions can be made before tax (sometimes known as concessional contributions because of the concessional taxation on these contributions) or after tax (sometimes known as non-concessional contributions because these contributions don’t get taxed at concessional rates).

You can also specify the amount of the contribution (in dollars) and the frequency of the contributions. Contributions can be made with a number of different frequencies or they can be once off contributions made at an age you specify.

Salary Annual Growth Rate

The Salary Annual Growth Rate is used to project increases in your Gross Salary from now through to your Retirement Age. As your Salary increases the employer or superannuation guarantee contributions we estimate will also increase. By default we set your Salary Annual Growth Rate to the default Inflation Rate. But you can change this if you want to.

Inflation Rate

The Inflation Rate is the estimated rate of inflation, or growth in prices, from now through to your Retirement Age. We use the Inflation Rate to estimate increases in some of the fees and charges we estimate. We also use the Inflation Rate to calculate the Present Value, or value in today’s dollars, of your Retirement Savings. This is an estimate of what the future purchasing power of your retirement savings will be. By default we set the Inflation Rate to 2.5% which is within the target range for Inflation set by the Reserve Bank.

Contribution fees

 

Yearly admin fees – dollars

 

Yearly admin fees – percentage

 

Yearly Insurance Premium

 

Yearly Adviser Fees

 

 

 

 

 

 

 

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Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.

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