May 17, 2016
In a bid to help Australians reduce their reliance on the age pension and build enough wealth to live comfortably in retirement, Mortgage Choice has launched an industry leading retirement income calculator.
According to Mortgage Choice chief executive officer John Flavell, the company's Retirement Income Calculator, powered by Investfit, is the first of its kind in the market, boasting a certainty level of up to 95%.
“Unlike other calculators, which work on averages and therefore only have a 50% level of certainty, the Mortgage Choice Retirement Income Calculator allows users to estimate their income in retirement with up to 95% certainty,” he said.
“The calculator, developed by fintech company Investfit, uses stochastic modelling, pulling historical investment market data to project a person's income in retirement based on their current investment strategy. The calculator also identifies if there is an alternate strategy that might enable them to better optimise their income. Users can then work with a Mortgage Choice financial adviser to find out how they might achieve their optimised income.”
According to Mr Flavell, Australians need tools that can provide them with clarity and certainty around their finances in retirement.
“Data from the Financial Services Council shows income support for seniors will cost the government $44.7 billion this year alone. Worse still, that number is expected to grow by approximately 7% each year.
“From this data it is clear that regular super contributions made by employers won't be enough to help someone fund their retirement. Quite simply, Australians need to be saving more for their retirement.
“To understand what they need to do, Australians need to first understand what their financial situation is likely to look like in retirement – an understanding that is not only based on their individual circumstances, but one they can be 95% certain of achieving.
“The reality is people make a lot of assumptions with regards to their retirement. For instance, a lot of people just assume they will have paid off their mortgage by the time they reach retirement. However, data from the Australian Bureau of statistics shows more than 20% of current households with occupants over the age of 65 either have a mortgage or are renting. Those in that position will ultimately have less money to spend on other things in retirement.
“Further, there are other potential risks that people don't think about when planning their retirement, including how long they may live for, the impact of inflation on the cost of the goods and services they will likely need, and how market volatility may impact their income in retirement.
“The more basic calculators on the market don't take all of these risks into consideration. As such, users may be left with false expectations.
“Mortgage Choice's Retirement Income Calculator factors in these risks to provide users with a far more reliable projection of their income in retirement.
“By using our calculator, users can answer a number of questions including: ‘what is the highest retirement income I can have', ‘can I afford to leave an inheritance for my children', ‘how certain is it that my retirement income will last', and ‘is my current investment strategy the optimal one for me?'
“By having a better understanding of their income in retirement, Australians can then have a more informed discussion with their Mortgage Choice financial adviser on they how might achieve those retirement goals.”