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New retirement calculator to calibrate insurance and savings shortfall

A group of Australia's leading financial researchers are aiming to get people thinking about retirement savings early, with a 'she'll be right' attitude leading people to be under or over insured and meander towards retirement with little idea of what are adequate savings.

The researchers today launched a new interactive online financial planning calculator, available at, devised to research 'gold standard' financial advice to help people reach their retirement goals.

Funded by the independent Centre for International Finance and Regulation (CIFR), the calculator has been developed by a team of actuaries and marketing experts from Bond University, Australian National University, University of New South Wales and University of Melbourne.

The prototype calculator has been two years in the making and is the first stage of a five-year research project. The final calculator will incorporate learning from the use of the prototype and offer a more in-depth suite of information, particularly around risk allocation and the choices between savings and consumption.

Bond University's Assistant Professor Gaurav Khemka said Australians often put off thinking about saving for their retirement and, as a result, the country was potentially heading towards a 'retirement crisis'.

"We tend to have a 'she'll be right' attitude towards retirement, meaning we don't start thinking about it until it’s too late to save adequately," he said.

"Across the board, we've found Australians have a lack of knowledge and interest, which combined with inconsistent financial advice, can lead to a shortfall in savings to support the lifestyle people want to enjoy in retirement."

Dr Khemka said the new calculator took less than half an hour to complete if users had their own input information such as income, expenditure and life expectancy. It is intended to guide people to  the right track to saving for retirement.

"While you can't control changes to government regulations or a job promotion, the three main factors you can manage is how much you spend and save, your asset allocation and when you choose to retire," he said.

"If you start thinking about those three things early, you get the best picture of how much you should spend taking into account your salary and the lifestyle you want now and in retirement."

Dr Khemka said although a range of retirement planning calculators have been available online for some time, they lacked the detail needed to provide sound financial advice.

"If you use two different calculators, the chance is you will receive two vastly different answers," he said.

"They do not provide enough detail to consider all the relevant factors over a lifetime, such as the impact of children, marriage, divorce, home buying, promotions, time off work and the age pension.

"Our calculator is being devised to provide 'gold standard' advice, including information on how much you should consume each year depending on your salary and circumstance.

"At the moment, it includes some inbuilt ad hoc assumptions, which will be refined over time based on the information provided by the users.  As a result, we encourage people to get on board and use this resource now so we can improve it further."

University of New South Wales (UNSW)'s Dr Anthony Asher said what many web-based calculators also lacked was the implications of financial decision-making on things that matter most to people now.

"For example, children and a home are more important to younger people than their superannuation, yet this is where a lot of financial planning questions focus," said Dr Asher.

"Most calculators start by asking you to set your target retirement income and then adjust how much you save based on this, but the reality is no-one wants to drop their standard of living now so they can have more later.

"It is considerably more engaging and empowering to factor in what is important to people now and show them how their standard of living can remain constant throughout their life."

Dr Asher said the feedback from financial advisers was that clients often did not even know how much they were spending.

"In Australia, the average person retires with half their wealth in housing and less than half in super," he said.

"We believe most people see that it is important to be in a position upon retirement where you have assets that can allow you to maintain your standard of living.

"The earlier you start thinking about these factors, the more prepared you will be and as your situation changes, you should continually revisit your plans to ensure you're still on track."

The calculator has been developed by a team of actuaries - Bond University's Dr Gaurav Khemka, UNSW's Dr Anthony Asher and ANU's Dr Adam Butt - together with marketing expert, Professor Ujwal Kayande from the University of Melbourne, who is particularly interested in developing its usability and interactivity for consumers.

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