When it comes to superannuation, Australian women are likely to have considerably less than men. The average Australian woman retires with around half the balance of the average man.*
How does this happen? Well, women tend to have broken work patterns to have or raise children and we are still paid, on average, lower than our male counterpart. This means that the contributions made on women’s behalf are lower and few are made. Also, if you are unfortunate enough to have gone through a divorce, the financial pressures tend to mean less emphasis has been placed on superannuation as daily living expenses become your focus.
What does it mean for me? If you haven’t looked at your superannuation, you may find that the funds you have set aside won’t actually provide for you in retirement.
The Australian Bureau of Statistics Retirement report July 2012 to June 2013 showed that on average, men receive 25% of their retirement income from superannuation annuity or allocated pension funds whereas women only receive 10% of their income from these sources. Also notable is that 44% of women stated their partner’s income as the main source of funding for their retirement costs.
The other thing to consider is while we never plan for it, divorce happens and relying on your other half to fund your retirement isn’t a good financial plan.
What can I do? There are a number of options and strategies available to you to build your superannuation.
Make additional contributions. Just because you are not working doesn’t mean you can’t contribute to super. It just changes the way you contribute and may restrict any tax deduction available.Superannuation splitting is a powerful tool. While on maternity leave, you could consider splitting your husband’s superannuation contributions so that your balance also increases during this time that you are raising and caring for your children. Superannuation splitting is not restricted to when you are not working so if you return to work and your husband is earning more, you could look at equalising the contributions made into each of your accounts.
Salary sacrifice contributions while working before or after maternity leave or even just to boost your superannuation can be a good strategy. These contributions not only build your superannuation balance, you should also be able to benefit from a tax deduction for doing so.
You could also look at taking on more risk in your superannuation portfolio to improve your potential for higher returns. This one is a risky one as higher returns also mean higher volatility which you have to be prepared for however with a longer timeframe, you should be able to achieve an overall higher return.
Just to put things in perspective, On average, women live longer than men, so their retirement funds will need to last longer. A long retirement and on less money?? No thanks! You need to see a financial planner today to make sure your own finances are on track to achieving your own goals.
*The Association of Super Funds of Australia (ASFA) ‘Developments in the level and distribution of retirement savings’ (2011).
This post first appeared in Leaders and Lattes “Latte Communique“
