Can you use online calculators to plan retirement?

As time goes on – I have seen more and more tools online to help people plan for retirement. Obviously, my views are bias being a financial planner but these online calculators can be misleading due to so many different variables and unknowns. However, they can also be a good starting point to get people thinking.

Moneysmart.gov.au has a full retirement planning calculator now – I am not sure when it was released but I don’t personally remember it being there say over 2 years ago. For the purpose of this blog though – I am just comparing their account-based pension calculator as the full retirement planning calculator has even more variables that can be hard for a user to understand and input to ensure an accurate output.

The calculator asks for the following variables for users of the calculator to input:

• Your age
• Retirement date
• Current super balance
• What income you would like from your superannuation
• Pension fees
• Investment option

The above are fairly simple variables but retirement isn’t always simple and here are my thoughts on the variables compared to what I see in everyday practice:

• Your age
  • Pretty straight forward this one and should be easy (although I have been guilty of not remembering my age sometimes!).
• Retirement date
  • Maybe straight forward if you know when you want to retire.
  • A lot of the time when people seek advice they don’t know when they can actually retire based on their current levels of superannuation/investments and are not sure if it will be enough to support them to live a comfortable retirement.
• Current super balance
  • You should easily be able to find this.
• What income you would like from your superannuation
  • This can be straightforward, or it can be complicated.
  • You might be eligible for a part-age pension where the income you draw is variable from your superannuation.
  • Or you may have an investment property providing you with variable income and you may still have a working spouse.
• Pension fees
  • You should be able to find this in the relevant Product Disclosure Statement of your fund.
• Investment options
  • They give you a few options to choose from like Moderate, Balanced, High Growth.
  • However, you might be invested in a Balanced fund with your super provider but that risk vs return characteristic is different to what Moneysmart.gov.au website estimates which can lead to discrepancies.