Investor InsightsSuper Stategies > How to ensure you don’t short-change yourself in retirement

How to ensure you don’t short-change yourself in retirement

October 2019

Women need to plan ahead for a financially secure future

Career breaks and caring responsibilities can make it challenging for Australian women to amass enough superannuation to support themselves comfortably in retirement. But recognising the issue and taking steps to address it now can put you in a better position when the time comes to finishing up working life.

Research by the Association of Superannuation Funds of Australia (ASFA) showed the average superannuation balance at retirement in 2015-16 was $270,710 for men but just $157, 050 for women.

Women working part-time and in lower paid roles, and taking time out of the paid workforce for family and other reasons, are thought to account for the disparity.

Roger Wilkins, co-author of the 2018 Household, Income and Labour Dynamics in Australia (HILDA) survey, which collects data from 17,000 Australians each year, says these factors typically impact women in their critical earning years. When your income goes down, so do your superannuation contributions.

Doing your sums

ASFA’s Retirement Standard suggests a single person will need $545,000 in retirement savings and couples will need $640,000, in order to enjoy a comfortable retirement.

A super balance at those levels should provide an income that allows you to enjoy leisure and recreational activities, dress well, replace household goods when necessary, run a reliable car, hold private health insurance and take holidays, domestically and overseas.

They’re significant sums and it’s easy to feel daunted if your income is modest or your super savings have fallen behind as a result of working part-time or having an extended break from paid employment.

Financial adviser Sandra Miller from RI Advice Shepparton and Bellarine Financial Solutions says setting goals and working at them, however slowly, is the key to building a balance that will allow you to enjoy greater security in retirement.

Taking steps to address the shortfall

There are several things women can do to ensure they don’t finish their working lives with a super shortfall, according to Miller.

Becoming actively involved with your retirement savings is the first step. That means knowing where your money is invested, how your balance is tracking and how much you’re paying each year in fees.

“Many women, and men, are disengaged from their super because it’s such a long-term investment,” Miller says. “If you’re in your early working years, the contributions you’re making now may be locked away for several decades. But it’s still your money and the decisions you make now can have a big impact on your final balance.”

Topping up your account with additional voluntary contributions, at the times in your life when you have the capacity to do so, can see your savings swell significantly.

“Depositing unexpected windfalls into super or sacrificing a small percentage of your pay can really add up over time,” Miller says. “If you start early enough, an extra $200 a month can mean an additional $140,000 in your account at the end of your working life.”

If you have a spouse, they may be entitled to a $540 tax offset, if they make after-tax contributions of up to $3000 a year to your super on your behalf, while you’re earning a low income or not in paid work.

Your spouse may also be able to even up your retirement nest eggs by sharing their pre-tax super contributions with you, via a process known as super contributions splitting.

The government also offers a low income super tax offset, and a super co-contribution of up to $500 a year to eligible, low income earners.

Vanessa’s super story

Vanessa Kelso is keen to ensure her retirement savings stay on track, as she juggles working for a charity and caring for her children, Xavier, 4, and Evie, 2. She’s researched the superannuation shortfall many women face in retirement and wants to ensure she doesn’t become a statistic. Watch her discuss her options with financial adviser Cathryn Gross from Twelve Wealth.

Seeking expert advice

Thinking about how much super you’re likely to need and how you should invest your funds is not always easy. Many women avoid addressing the issue because it doesn’t feel like a high priority in the ‘here and now’. That’s easy to do but it can be a mistake that costs you dearly a couple of decades down the track. Taking action now means it’s less likely you’ll be scrambling to make up a super shortfall later on. It can mean the difference between struggling to cover significant expenses in your retirement years and enjoying financial freedom and security.

Financial advice can help you to understand your position, create a budget, and develop a strategy to keep building your super balance at every stage of your working life.

To discuss how you can put a super savings plan in place, contact your financial adviser.

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