By AMP Financial Planner Stephen Schill

 

When it comes to women keeping up with men’s superannuation balances, the unfortunate truth is that the majority are still lagging behind.

According to the recent AMP Retirement Adequacy Index**, while average super balances for women have increased, the gap between female and male balances widened across all age groups. The average balance for males was $54,061 compared to just $29,692 for women – a 45% difference.   

 

The reasons women have less super:  

• The average income for women is lower than for men  
• Women often take time out of the workforce to start a family  
• Many women work part-time while raising children
• While women are often great at managing the household budget, they are not always financially literate about ‘big picture’ issues such as retirement planning
• Women often put the costs of raising children before their own financial needs
• Women live longer than men so their superannuation needs to last longer
• Women who divorce may lose their nest egg if, for example, their partner retains all the super when assets are divided

 

For all these reasons, many women reach retirement age and suddenly realise they do not have enough super to live comfortably.

 

Or worse still, some women do not have any superannuation at all and have to get by on the Age Pension, which may not be adequate to support their basic living and health costs.  Some may struggle to put food on the table, keep up with maintenance of the home, upgrade their vehicle or pay for a social life or travel.

 

The good news is, there are some simple tips to help women boost their super. 

 

Super boosting tips for women

 

Joining the front line – 20s

• Start your retirement planning early – although most young women are just starting their careers and retirement may seem like a long way off, it is never too early to begin planning for the future.
• Don’t be a financial dummy – get your statement out and familiarise yourself with your super. Look at how your money is invested, the performance of your fund and the fees you are paying. Improve your financial literacy by seeking professional advice from a financial planner or signing up for a financial workshop.

• Consider salary sacrificing – while your employer must contribute the 9 per cent Government Super Guarantee, it is a good idea to top up your superannuation by salary sacrificing. Depending on how much you can afford, try to put another 2-5 per cent of your income into your super fund. By contributing more while you are young, you will get the benefit of compound interest. Lower income earners should also make the most of the government co-contribution scheme.

 

Launching a sound super strategy – 30s and 40s

• Have a solid plan in place – at this stage in life women might be well established in their career, they could be busy raising a family, married or single, looking to invest or take the holiday of a lifetime. Regardless of a woman’s lifestyle in her thirties and forties, it’s important to have a sound strategy for building your superannuation assets.

• How much is enough? – working out what you will need in retirement is always a difficult task. A general figure of 65 per cent of a person’s pre-retirement income is often used as a guide when looking at how much a person might need in retirement, however expected retirement lifestyle is also an important factor.
• Consolidate multiple funds – on average Australians have 3.5 super accounts each, wasting as much as $1.1 billion a year in unnecessary fees. Websites such as http://www.findmysuper.com.au/ can help you track your missing super. Once you have found it, consider consolidating it into a single account to keep fees to a minimum.
• Consider spouse super contributions – this is a good strategy for women if they are not working or are working part-time while raising a family. Their partner can make contributions to their superannuation and receive an 18 per cent tax offset. Spouse splitting is another method in which a person can contribute up to 85 per cent of their salary sacrifice payments and employer contributions into their partner’s super fund. Over the years, this will serve to equalise a couple’s super accounts and close the wealth gap.

 

Building on your reserves – 50s  

• Do a budget for retirement – consider the lifestyle you want and work out exactly how much income you will need once you retire. Make sure you accurately account for all your living expenses and budget for additional costs such as buying a new car or travel.
• Plough more money into super – now is usually the time for aggressive retirement planning. As a large chunk of your home loan will hopefully be paid off by now, you may be able to salary sacrifice as much as 30-40 per cent of your wage.
• Consider ‘transition to retirement’ – if a woman is 55 or over and still working they can start radically boosting their nest egg with a transition to retirement plan. This involves moving super into an allocated pension for a more tax efficient income. By using the pension to cover living expenses, you can then start injecting your salary back into super. Keep in mind there are concessional caps limiting the amount that can be salary sacrificed into super.

 

While it is important for women to start building their nest egg early on, remember it is never too late to get your retirement planning on the right track. By using these simple strategies, women can work towards a stress-free and comfortable retirement.

 

*Stephen Schill is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

**Source: The AMP Retirement Adequacy Index results, released on 1 March 2011, used data for the six months to June 2010 from more than 328,000 AMP corporate superannuation customers.