Women have very different superannuation needs to men, but many don’t realise this or know how to plan for their super. It’s time for women and superannuation to get better acquainted.
There are two key variables that mean women have different financial needs in retirement compared to men: they live longer, but they don’t earn as much.
Currently Australia’s gender pay gap sits at 13.4 per cent. That means that for every dollar a man earns in Australia, on average a woman earns 86.6 cents. So, women’s average annual full-time earnings are $79,040 compared to men’s average annual full-time earnings of $93,818.40. That’s a gap of $14.778.40 a year.
If you look at that from a women and superannuation perspective, it means an employer’s super contribution of 10 per cent is $156.20 per week for women, but $180.42 per week for men. Putting an extra $24.22 a week into an super account with a balance of $100,000 at age 30 until age 65 means men retire with a super balance of $696,866, compared to women with $618,057. That’s an extra $78,809, even without any other factors.
Longer life with less funds
But wait, there’s more. Or, less actually. Many women leave the workforce for a period of time to have children, and when they return to work, they often work part-time. This significantly cuts their income earning potential, which in turn cuts the amount they build up in super. Around 43 per cent of women work part time.
Between the gender pay gap and the reduced income of part time work, women’s super balances lag significantly behind men’s on retirement. Which is particularly heartbreaking when we consider that they also have a longer retirement to fund. On average, women live around four years longer than men ( Australian Bureau of Statistics figures show that life expectancy at birth was 80.9 years for males and 85.0 years for females in 2017-19).
Not even close
Actually, we’d be smiling if we managed to have $618,057 in our super to fund us until we’re 85 years old. The Australian Human Rights Commission has found that women actually receive a $37,000 super payout (compared to men’s $110,000). You read that right: women currently have on average of $37,000 to fund their retirement. And they’re the lucky ones. Half of women aged 45-59 years actually have $8,000 or less.
Things really are grim.
Women and superannuation considerations
This is particularly harrowing news for older single women. No surprise given the above statistics that around 40 per cent of older single retired women have been found to live in poverty and experience economic insecurity in retirement.
It’s super clear that women and superannuation need to get reacquainted. There’s plenty women can do to protect themselves from falling short at retirement. The key is to start taking superannuation seriously at any age, no matter your relationship status.
Here are some of the key considerations women should make when planning for their retirement.
Make sure you’re in the right fund
Most super funds charge annual fees (check comparison websites like Canstar, RateCity or YourSuper to see who charges what). This money comes directly out of your super account. How much you pay can make a huge difference to your super balance over time.
Check also that you’re invested with the right super fund. Then check you’re in the right investment option within that fund (conservative, balanced, growth and others). Last financial year, all of the top 20 performing funds earned over 18 per cent return on balanced options. So have a look at your annual superannuation statement and set 18 per cent as the benchmark to know whether your fund is any good or not.
Sort out your insurances
If you have a partner, it’s worth making sure your partner has an adequate life insurance policy, especially if you have kids. If you are working, another good idea is to have income protection insurance which will pay you income in the event you can’t work for a medically verifiable reason. It’ll give real peace of mind if anything happens to you.
Make additional contributions
If you are working, consider making additional super contributions above and beyond the government’s super guarantee.
- salary sacrifice by making contributions with pre-tax dollars. Talk to your boss about this and if your employer isn’t able to assist, contact your superannuation fund directly. You can make contributions using after-tax dollars and claim them back at tax return time.
- see if you quality for the Government’s co-contribution scheme of up to $500 for low income earners.
- assess whether your spouse can make a contribution on your behalf and they’ll receive a $540 tax offset.
- make sure you are the “nominated beneficiary” of your partner’s superannuation so you get their super money if they die.
Consolidate and find lost superannuation
If you work part time, or in service industries, you may have had a lot of different jobs. This means superannuation might have been paid into a range of different funds. Consolidate these contributions into the one fund to cut down on fees.
It’s a simple process to find any superannuation you may have lost track of. Head to the ATO for instructions, and be aware that while there are plenty of companies who will charge you, it’s actually very easy and free to do it yourself.
More tips here: 6 strategies that can supercharge your super
Take control of your finances
Don’t make the mistake of waiting until retirement or, worse, until your partner dies before getting a handle on your finances. Instead, take charge of your money now to give yourself peace of mind and a sound financial future.
We’ve seen that even an extra $24.22 a week grows to significantly increase in the money you have at retirement. ‘Gifted’ to men, but achievable for savvy women who keep an eye on their super to accrue as well.