Tracking retirement income
Boomers need to start saving a lot more if they want a comfortable retirement. But they are not getting the message because they don't have the information they need to realise it. Annual statements need to include retirement income forecasts to show whether they are on track to achieve it.
Boomers need to start saving a lot more if they want a comfortable retirement. But they are not getting the message because they don't have the information they need to realise it. Annual statements need to include retirement income forecasts to show whether they are on track to achieve it.If funds did this, it would doubtlessly make for uncomfortable reading. That would be no bad thing if it jolted more people out of complacency.What it would show is that most older members are heading for a far more modest retirement than expected. Most are destined to rely on the age pension or part-age pension. Their modest savings will not provide enough retirement income, especially after allocated pension fees are taken out. And many will need to use some of the funds to replace their car or do home repairs before they settle into life after work.Younger super members will be better off, having had the benefit of compulsory super for all of their working lives and because the 9 per cent super guarantee is gradually being lifted to 12 per cent.But everyone needs to know how they are tracking and that's why funds should be compelled to include retirement income forecasts in annual statements.The trouble with annual statements, as they stand, is that by focusing on investment returns, fund members are missing the main point of super. Returns are important but fund members need to know what retirement income they are likely to have.The point was made recently by Cameron O'Sullivan, a co-founder of Provisio Technologies. He is working with funds on how they can include retirement income projections on member statements. If there is a shortfall, the fund would tell the member how much needs to be contributed into super to get on track.Most people stick with their funds' default option despite their big tilts to shares. Picking the right investment option is important, however making fund members aware of their savings' shortfall is equally so. It might prompt them to take the next step and salary sacrifice more into super. Official data suggests salary sacrifice inflows have declined because of poor fund returns.