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Superannuation retirement balances: A surprising outcome
Author(s) -
Cohen Michael Brian
Publication year - 2014
Publication title -
australasian journal on ageing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 34
eISSN - 1741-6612
pISSN - 1440-6381
DOI - 10.1111/ajag.12094
Subject(s) - variance (accounting) , balance (ability) , outcome (game theory) , actuarial science , economics , health and retirement study , retirement planning , retirement age , econometrics , demographic economics , finance , microeconomics , psychology , accounting , gerontology , medicine , pension , neuroscience
Aim Although the guaranteed superannuation system is believed by many to provide a safe and adequate source of funds in retirement, some will be unpleasantly surprised. The aim of this paper is to demonstrate the significant effect of the economic cycle on the final accumulated balance in superannuation retirement accounts. Method A M onte C arlo simulation is used to illustrate the variance in outcomes that can be expected for a hypothetical individual. Results The expected accumulated superannuation balances for two hypothetical individuals are estimated. The spread of outcomes is used to illustrate the problem of using only the mean of the distribution as a predictor of wealth in the retirement years. Conclusions Many retirees rely on superannuation to fund their retirement. However regular contributions to superannuation does not ensure a predictable outcome, and active management of contributions is required if retirement goals are to be met.