Australia: superannuation, the Age Pension, and what this projection assumes
Superannuation is the main retirement vehicle in Australia and can usually be accessed before the Age Pension age. That gap is the structural fact worth planning around here. The Age Pension age reached 67 on 1 July 2023, but super becomes reachable earlier, at your preservation age, so the age you stop working and the age the government starts paying are two separate dates. The calculator projects one balance to one age; if you intend to live on super first and add the Age Pension later, run it to the earlier age and treat the Age Pension as reducing the income you need after that.
The Age Pension itself is not modelled, and it is means-tested on both income and assets, so what it pays depends on the very balance being projected here. A projection that quietly assumed the full rate would flatter the result. Work out what you expect it to pay and subtract that from the income you enter.
The assumptions behind the Australian figures. Everything on this page is a projection built on assumptions you can change, not a forecast of what your savings will be worth:
- Return: 7% a year, nominal, on a diversified portfolio held in Australian dollars, before tax and before fees. Every year is assumed to return exactly that. Real markets do not, and a bad run in the years just before you retire costs far more than the same run twenty years earlier.
- Inflation: 2.5% a year, applied as a constant. The today's-money figures divide each year's balance by 2.5% compounded, which over 35 years cuts a nominal balance to about two-fifths of its face value.
- Real return: 4.39% a year, which is (1.07 ÷ 1.025) − 1, not 7% − 2.5%.
- Withdrawal rate: 3.5% of the balance in the first year of retirement, rising with inflation after that. The familiar 4% figure is an American result; the main guide explains why this page opens lower.
- Contributions are added at the end of each year and grow at whatever rate you set. Employer superannuation is not added for you: if you want the super guarantee counted, include it in the contribution figure yourself.
- No tax and no fees. Super is taxed concessionally going in and largely untaxed in the pension phase, and a fund's fee comes straight off the return. Enter a return net of fees if you want that captured.
Change any one of those and the answer changes. Nothing here is personal financial advice, and the result is worth exactly as much as the assumptions above.