Retirement Calculators Found Unreliable in Recent Study

A study conducted by Super Consumers Australia (SCA) has highlighted significant inconsistencies in retirement calculators provided by the country's largest superannuation funds. The research evaluated these calculators based on their ability to project retirement income for a standard scenario: a 50-year-old woman earning $55,000 annually with a super balance of $95,000, who is single, owns her home, and plans to retire at 67.

The findings revealed that projected retirement incomes varied dramatically by 74%, with estimates ranging from $29,928 to $52,000 annually. Such discrepancies could mean the difference between a financially strained retirement and one of relative comfort. The study attributed much of this variation to the calculators' reliance on "arbitrary assumptions" about retirement needs.

The analysis also uncovered that 77% of calculators provided retirement income projections that were either too low or too high based on the predicted balance at retirement, which is concerning given the Australian Securities and Investments Commission's (ASIC) guideline that a superannuation balance should be drawn down by age 92. Some calculators suggested the balance would last anywhere from 10 to over 35 years, posing a risk of either running out of funds too early or underspending significantly.

Furthermore, most calculators lacked personalised guidance to help individuals determine a suitable income target based on their specific circumstances. The only exception was AMP's calculator, which helped users navigate through typical spending categories like telecommunications, energy, and groceries.

The study also pointed out that some calculators used outdated information or inaccurate fee estimates. For example, AMP’s calculator was based on the ASFA 'Comfortable Standard' of $47,217 per year, which was outdated at the time of the review.

This report underlines the need for more accurate and personalised tools to help consumers plan their retirement finances effectively. Ideally, retirement calculators should provide clear guidance and updated information, enabling users to make informed decisions based on their actual spending needs and lifestyle expectations.