Super Women: Are you getting the Superannuation you deserve?
It's a simple fact that Australian women just don’t have enough superannuation. Are you one of them? The average woman will be forced to retire with just over half the amount of super in her pocket that a man might. And a crazy 1 in 3 end up with nothing at all! It's a pretty scary situation that tends to only get worse if you're a single mum, self-employed or a freelancer.
This Super imbalance comes from;
• women earning less than men in general
• taking time out from your job to start a family
• women living longer than men
• a lack of targeted education on money matters for women
With our ageing population and a shift toward self-funded retirements, the difference in savings should be on every woman's mind.
My wife Beth and I can relate. We had our first baby Mabel when she was 31, and like most families, she took a year off on maternity leave. Beth had started her own business so she could work part time and still care for our daughter. Shortly after this, our second child Eli came along and she took some more time off work. Of course, just as things seemed to be to getting back to normal we had a pleasant surprise; along came baby number three, hi Gretel! and yet another year off the job. Though we managed to find a way to keep Beth’s business going for that extra year, it was a struggle without even considering the dent it would make in our financial future.
Mums typically take 7 years off work to look after their kids. Women seem to retire with 40% less super saved up than men; $224,734 vs. $97,054 on average. Over a third of women don’t have enough money to fund their lifestyles when they exit the workforce. This problem is made worse by the gender wage gap and the fact that women tend to be paid 17% less than men upon returning to work (they even came up with a name for this happening: 'Motherhood Penalty' a.k.a. ‘Wage Penalty Effect’).
Make your Super, super again.
The above might be pretty daunting, but there are a range of things we can do right now to sort out your super situation. Here are some of the strategies that my wife and I personally implemented to assist with managing her Super situation.
Consolidate your Super & start a joint fund
An easy one to start with. We wrapped all of the multiple Super accounts we had from working in different jobs over the years into one account. This cuts down on fees, as we were paying multiple admin fees, multiple investment fees and multiple insurance premiums. Consolidating not only stopped our Super being eroded, it made it easier to manage and monitor the progress of our nest egg.
We put in place a salary sacrifice strategy for Beth so that she could take advantage of pre-tax contributions and boost her Super savings. You might consider taking advantage of the government's co-contribution scheme. If you earn less than $51,021 a year, they’ll pay a little extra into your super if you make your own contribution of $1000 from your salary. If you earn less than $36,021, they’ll pay 50 cents for every extra dollar you pay into your super (up to a maximum contribution of $500). This is basically free money that may go a surprisingly long way over the years!
Sharing is caring
We have recently begun to split my Super contributions to take advantage of the available tax benefits. Splitting may also help keep long-term costs down as recent legislation changes cap the amount of Super you can have tax-free at retirement at $1.6 million. If you are in your late 20s or early 30s it's a real possibility that you or your spouse may reach this milestone by retirement, so if you can divvy it up early you might avoid extra tax.
It’s really important to think of your Super as an asset and to take ownership of it early in your life. Review your Super balance regularly, ensure you are making the most of it based on the current tax rules and take full advantage of new opportunities (like being able to purchase property with your Super fund).
Note: these strategies may not be quite the right fit for you but we can help you find a solution that suits! If you’d like to chat about anything in this blog or learn how we can help you to set your Super straight get in touch anytime.