High Net Worths may have a harder time maintaining their lifestyle in retirement if they rely on standard savings plans, according to Dimensional Fund Advisers.
Its research found that higher earners faced greater challenges in maintaining their lifestyles in retirement than low income earners.
A number of factors including the amount of income that needs to be replaced, increased revenue contributed by the aged pension in lower income groups, and the larger impact of superannuation on savings, meant one-size fits all savings plans were unsuitable.
The study said employees should increase their savings rates as career progression led to increases in income to have a better chance of maintaining their current living standard.
Although the research modelled realistic income patterns based on data from thousands of US households, Dimensional said the research was still relevant to the Australian market.
Dimensional vice president of research and co-author of the study, Marlena Lee, said income uncertainty was significant when planning for retirement, so a one-size-fits-all approach was unlikely to work for everyone.
"Our research illustrates the need for a more fluid and flexible approach for optimised savings, based on the impact of different incomes and the way income changes over time," she said.
A Dimensional research project last year challenged the notion that 75-85 per cent of income needed to be replaced in retirement and said instead that retirement adequacy was more nuanced and based on individual circumstances.
Australia’s second largest super fund has added thermal coal companies to its list of investment exclusions.
The fund has expanded its corporate superannuation solutions to partner with Australian businesses of all sizes.
The chief executive of Aware Super anticipates a significant shift in how ESG factors will influence portfolio values in the next six years, surpassing the changes witnessed in the past two decades.
In a recent statement, shadow assistant minister for home ownership and Liberal senator for NSW, Andrew Bragg, accused ‘big super’ of fabricating data attributed to the Reserve Bank of Australia to push their agenda.
Add new comment