Superannuation
Superannuation and Women
This article is directed at women, to support women in gaining a better understanding of superannuation and the impact of gender inequality.
Many older women, particularly those that are single or widowed, live retirement in poverty and experience financial hardship and insecurity. The age pension may be a safety net, but is it enough?
If you feel your superannuation balance has been affected by time out of the workforce and worry about how you may secure your retirement income, then we do hope you learn something from reading this today.
Why is superannuation important?
Superannuation is one of the best structures in the Australian Tax and Legal system to protect your retirement savings from lawsuits and bankruptcy, and reduce the burden of tax on your earnings.
Did you know?
- You can split your partner’s superannuation contributions to build your super balance
- You may be able to increase your tax returns through personal contributions to super
- Super in most instances is protected from creditors and bankruptcy
If your partner is your retirement plan, then this article is talking to you. It is not uncommon for unexpecting widows or divorcees to find out, all too late, that they are not as prepared financially as they ought to be.
As women it is up to us to stand up and take interest in our own financial future.
We live in the lucky country that is Australia, where women now have a voice and responsibility to take an interest in their own financial wellbeing. Some things to consider with superannuation are:
- Seek advice regarding fees within your current fund and the true value of the investment options.
- If the investment strategy of your current fund matches your needs and time horizon.
- Is the insurance within your super really appropriate?
- How to improve the return.
- Is your partners estate plan in order to protect and provide the best outcomes?
If you only retain one thing from this article today, it should be this…
Albert Einstein said “Compound interest is the 8th wonder of the world. Those who understand it will prosper, and those who don’t will pay.”
Start making small contributions often, no matter how small. Superannuation is about having money working for you to produce a return beyond physical exertion. It is this ability of your money growing while you sleep that will secure you a better retirement. I call it the ‘sleep and reap’ plan. Get your money to work for you.
For most, superannuation, or ‘super’, is generally money put aside by your employer as compulsory payments that accumulate throughout your working life to supplement your retirement. Over the years women have been disadvantaged due the fact that earnings of less than $450 per month did not require super guarantee contributions from employers, and many have spent significant time out of the workforce raising children and maintaining the family home. If this is you, you are not alone.
Your employer simply pays ‘contributions’ into a super account on your behalf. Your Superfund then invests those funds with the objective to achieve compound growth on the amounts invested over the long term.
This is known as the accumulation phase; it is important that we accumulate enough funds over our work life to have sufficient funds in retirement. We don’t plan to fail, we just fail to plan.
Did you know that 80 percent of women are currently retiring with insufficient superannuation savings to fund a comfortable lifestyle? Here are some chilling statistics from Super Guru (Source: Super Guru https://www.superguru.com.au/about-super/women-and-super )
According to the Australian Bureau of Statistics, during 2019-20 women between thirty and thirty-nine years old were three times more likely to be out of the labour force than men.
According to The Workplace Gender Equality Agency, women on average accrued approximately half the level of men’s retirement savings. Yes, usually over 50% less than men! As much as we adore our children, and we wouldn’t change this for the world, most of us don’t want to rely on them in retirement either.
In May 2020, women’s full-time adult average ordinary time earnings were 86% of that of men. This represents a gender pay gap of 14%. For graduates of most fields of study, females are paid less than their counterparts. The field study with the largest outcome difference was Dentistry, with females earning $73,000 per year compared with $90,000 for males. The gender pay gap causes a huge disparity between superannuation balances at retirement. (Source: https://www.abs.gov.au/statistics/people/people-and-communities/gender-indicators-australia/latest-release)
These statistics are concerning for women, and those who want to take control may feel unsure about how they can improve their superannuation or who they can trust to provide them with quality advice. Worryingly, the majority of us were encouraged to learn a second language through-out school, yet many of us feel vastly uneducated about superannuation and how it works. We all need to learn the language of money to understand it.
Most people spend more time planning a two-week holiday at Christmas then they do for the twenty-year holiday they must have later in life. Since we cannot access superannuation now, most of us have it sitting in the background and pay little attention to how its working for us.
For many woman becoming young adults and entering the workforce, we prioritise education, higher education, travel, finding a partner, having kids and raising a family.
Your superannuation fund is basically a product which is the vehicle used to invest your funds. Every product will have a different strategy used in order to achieve a targeted return. Therefore, different investments can result in different returns, some being a higher return than others. So, taking the time to learn how your money is being invested, the return they aim to achieve for you over the long-term, and if the strategy is suitable, can vastly improve your superannuation balance in the years to come.
Unfortunately, your superfund doesn’t stop charging you when you take a pause in making your contributions and high fees may erode at your balance. Taking time to make sure you are in a low-cost product can save you thousands of dollars down the track.
Quality advice around superannuation can play an important role in securing your retirement income. There are a few small changes that you can make now that can significantly improve your final balance, and we have the tools to prove it to you! We believe that if we empower you to make small changes now, we will help you and your family reach your true financial potential.
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