Savvy strategies for women to maximise superannuation
16 August 2018
The average superannuation account balance for Aussie women when they retire is around $115,000 less than the average for men, while one in three women retire with no super at all. It's important that women focus on growing their super so they can lead a comfortable retirement. Here are a few savvy strategies.
The average superannuation account balance for women when they retire is around $115,000 less than the average for men, the Association of Superannuation Funds of Australia (ASFA) reveals. The Association of Superannuation Funds of Australia (ASFA) also reveals that a higher percentage of women than men retire with no super balance at all.
These are worrying stats; as Australian women are living longer than men, they actually need more super. That's why Aussie women need to adopt some savvy superannuation strategies to ensure they have a comfortable retirement.
1. Boost your super balance by salary sacrificing
As the national gender pay gap in Australia is currently over 15%, according to the Workplace Gender Equality Agency, women have to work harder to accumulate retirement savings. This means making additional contributions on top of what your employer pitches in.
Your employer will contribute 9.5% of your salary into your super fund, but you can contribute more. This is known as salary sacrificing, or additional concessional contributions. These additional contributions are taken out of your pre-tax salary. As your employer handles it, all you have to do is set it up and let it work its magic!
Boost your super balance by making some additional contributions out of your pre-tax salary.
2. Make non-concessional super contributions
Another way women can grow their super balances is by making additional contributions out of after-tax pay, which are known as non-concessional contributions. Because you've already paid tax on them, you won't need to pay additional tax when your super fund receives them.
3. Consolidate your super funds
Around 40% of Aussies with superannuation have money in more than one super account, the ATO estimates, while 38% of Aussie women have a whopping six super accounts or more!
During your working life, you might build up super balances in several different funds. If you don't consolidate all of these funds into one account, you're paying more fees than you need to. Make sure you only pay fees on one account by moving all your super into a single fund. If you’re an LGS member, you can easily find and consolidate your super in just a few clicks.
4. Switch super funds
More Aussie women than men feel that dealing with money is stressful and overwhelming, according to findings from ASIC's Australian Financial Attitudes and Behaviour Tracker. But if you take the time to sort out your finances, it could benefit your retirement enormously. Often your choice of super fund was decided by your first employer - and you've probably stuck with that fund ever since (and maybe added a few other ones in there along the way). But not all super funds are created equal. Fees differ widely, and the difference between investing in a high fee fund and a low fee fund could potentially mean over $100,000 extra in your super balance upon retirement, ASIC's superannuation calculator shows.
It's vital to do your own research into different funds to find out if you could be paying less in fees each year and getting potentially better returns (though past returns are no guarantee of future performance, so don't make your decision based solely on past returns alone). If you find a better fund than the one you're currently in, consider making the switch to secure your financial future.
5. Look at your investment strategy
When you enrol in a super fund, you can choose from several different investment strategies, or leave it at the default option. However, you should consider what is the best strategy for your individual needs. Young Aussie women, for instance, might want to consider enrolling in a growth option. This does come with a higher level of risk (you could see negative returns in some years), however in the long-term, a growth strategy is more likely to produce higher returns than a more conservative strategy.
If you're close to retirement, it could be better to consider a balanced or conservative option, however young Australians have plenty of time to weather the gains and losses of their investment, and are therefore better equipped to take on a riskier approach. You should always consult a trusted financial planner to decide which investment strategy is best for you.
6. Get a helping hand
Taking advantage of the support available from other sources is one of the best tips for women to maximise their super. The Australian Government offers an incentive for low-income earners (known as the low-income super tax offset) that you could be eligible for, so check the ATO website for more information.
Did you know your spouse can help you out with your super?
Even if you're earning an average income, there's no getting around the fact that Aussie women still have lower super balances than men upon retirement. This is because they are more likely to work part-time, have career breaks, care for elderly parents and look after young children, Australian Securities and Investments Commission (ASIC) data shows. Of course, more women are balancing family and working lives, however the stats clearly show that all is not equal just yet.
In light of the gender pay gap, it's little wonder that the super balances of men are higher - they have higher incomes to take advantage of compound interest over time that grows their retirement savings.
To make sure you're still growing your retirement funds, it's important to come up with a plan to account for periods when you're not working or earning a lower income. You can make additional personal contributions, but there's another option that could help: Your spouse can pitch in and make spouse contributions should you need to take time off to care for family or young children. Check with your partner on whether this could be an option.
Prepare yourself for the retirement you want
Adopting these savvy superannuation strategies can help you build a nest egg to help you live the retirement you want. For more advice, or to find out more about LGS, reach out to our team.
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