RETIREMENT! The very thought of it appeals to many hardworking persons. They think about a time for doing the things that bring them pleasure, recreation and fun. Sadly, many, in particularly women, will not have sufficient superannuation savings to fund the lifestyle they are hoping for in retirement.
On average, women retire with 39% less super than men and surprisingly an estimated 40% of older single retired women live in poverty in retirement. This group of single retired women are the fastest growing cohort of homeless people in Australia. What are the reasons for this? Australia’s gender pay gap is currently 13.9% so on average, women earn less than men and since compulsory employer super is based on wages, women will have less in super in retirement. Women are also more likely to take time off work for maternity leave and to care for their families. As a result, a lower superannuation balance may mean a reliance on receiving a government pension. For some, this may limit their independence and affect their quality of life.
Alan Lakein, a well-known author on personal time management said, “Planning is bringing the future into the present, so you can do something about it now.”
What little steps can you take now to prepare for the kind of retirement you want?
- CONSOLIDATION… Do you have multiple super funds? If so, consolidating your super will likely reduce the management fees you are paying to different funds.
- INVESTMENT CHOICE IN SUPER… Most super funds allow you to choose from a range of investment options and asset classes. These may include, growth, balanced, conservative and cash. Do you know what investment options are available to you and have you reviewed how your super is invested? Your investment choice will affect the earnings in your super and ultimately will impact the balance you have in super in retirement.
- INSURANCE IN SUPER… Most super funds offer life, total permanent and disability and income protection insurance for their members. Premiums are deducted from your super to pay for your insurance cover. Have you reviewed your level of insurance cover? Do you know if you are over or under insured? Do you know how much you are paying in insurance premiums for your cover?
- CONTRIBUTIONS… You can boost your super and get the power of compounding to work for you by making additional contributions. If you make personal [after tax] contributions, you may be eligible for the super co-contribution and the low-income super tax offset of up to $500 each. You can also salary sacrifice part of your salary and have it paid to your super fund. By salary sacrificing to super, you may be able to reduce your tax because you are only paying 15% tax on your contributions you make rather than your marginal tax rate. Salary sacrifice to super is considered employer contributions so its important to ensure that you don’t exceed the annual contribution cap of $25,000 for concessional contributions. From 1 July 2019, if your super balance is less than $500,000 and your employer contributions have not exceeded $25,000 for the year, you are able to carry forward the unused part of the contribution cap for up to 5 years. This may be a valuable opportunity for those who suddenly have a lump sum assessable income resulting from a disposal of a property.
If you would like to know more or come in for a free 30 minute appointment to speak to one of our team on how you can make the most of your superannuation, get in touch here!
Helen Yau – Manager + Financial Planner
CA, BCom, Dip Fp, SSA