Standard savings plans fail
High net worths may have a harder time maintaining their lifestyle in retirement if they rely on standard savings plans.
Dimensional Fund Advisors research has found that higher earners face greater challenges in maintaining their lifestyles in retirement than low-income earners due to 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.
The study found that employees should increase their savings rates as career progression leads to increases in income.
Dimensional vice president of research and co-author of the study, Marlena Lee, said income uncertainty could be significant when planning for retirement, so a one-size fits all approach is 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.
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