When it comes to saving for retirement, you can’t really argue that women are getting the short end of the stick.
Not only are we generally working for less money than men (even if we undertake exactly the same position and hours), but we also take time off to have and care for our children, and live longer.
What this means is that our superannuation, the money that is supposed to support us through retirement, has to stretch longer despite not being as much. Remember that when we take time off to have children, there can be months, or even years, when no contributions are being made, leaving you at a disadvantage.
There is some good news though. There are steps that you can take now to maximise your retirement savings for the future. Don’t put it out of your mind, or ignore it to ‘deal with later’. Take a proactive approach to your super now, even if you haven’t had children yet, to make it work better for you in the future.
In this article, we’ve put together three possible strategies for getting more into your superannuation now, so you can take advantage of the fund later.
1. Take Charge Of Your Super
The biggest mistake you can make with your super is putting off dealing with it until later in life. It might be nice to think that everything is just going to work itself out in the end, but the fact is that if you don’t make your super a priority, it isn’t going to support you.
Spend a few hours every year assessing the way you’re building your super. Consider making automated voluntary contributions to build your super along with your employer’s contributions. Also, take the time to check your super fund statement every year, looking at the balance and the contributions that were made throughout the year. If you’re working, you should be checking that these contributions are accurate. Consolidate all your super funds into one, make sure your fund has your Tax File Number attached, and keep an eye on the fees.
2. Pay Extra While You’re Working
This might not seem like such a good idea, particularly when you’re already struggling to fit your budget to your day-to-day expenses, but contributing extra to your super is smart. This is particularly true if you’re planning to spend time out of the workforce when you have your children. In a way, putting your own voluntary contributions into your superannuation nest egg is a pre-emptive way to prepare for spending some time as a mum. The important thing to remember in
any case is that even a small amount of money, like $10-$20 a week can make a big difference over your entire working life when you retire.
There are two options to make extra contributions to your super: salary sacrificing and after-tax contributions. Salary sacrificing means you give up part of your pay and have it put into your super fund instead. This means the money that goes into super isn’t assessable income when it comes to taxed, and while it is taxed as a part of your super fund, this is generally a lower rate. If salary sacrificing doesn’t seem like a good idea, we’d recommend having a look into after-tax contributions, which you can find more about here. If either of these options are something you’re thinking about, chat to a financial advisor about what option is going to work hardest for you.
3. Contribute Even When You Aren’t Working
Many women choose to take time away from work to have children and raise them. In these cases, women often don’t work at all, or only work casually or part-time. During this time, you can still make contributions to your superannuation, either in a voluntary regard, or with the help of your spouse.
It is possible to make voluntary super contributions from any income you receive. This includes part-time or casual work, self-employed or business wages, the Family Tax Benefit, gifts and other ‘informal’ income streams. If you aren’t working or getting any income, your other option is to have your spouse make super contributions on your behalf, allowing your fund to keep growing. They can do this as voluntary after-tax contributions, or by splitting their own contributions between their fund and yours.
Now, you’ll probably need to talk to a financial advisor about which of these options is best for you, and what you can do will spend on your individual circumstances and other factors such as your combined income. Not all super funds allow for super splitting, and some have fees involved in the process. The ATO has more information about splitting super contributions.
At the end of the day, there are some disadvantages that come with being a mum, particularly in the long-term. We hope that with some simple tips, you can offset that disadvantage, leaving you in the green come retirement.
What are you doing with your super?