We already know that women finish their careers with much less super than men. On average, women retire with $157,050 in superannuation, compared to men at $270,710. That’s before you consider that almost 35% of women approaching retirement have no superannuation at all.
And this disparity is one of the major causes of growing homelessness in women over 55.
The latest figures for the Early Release of Superannuation scheme indicate that women are withdrawing more super than men. When we take into account the gender pay gap and the often erratic working patterns of being a mother, it’s not surprising that people are crying out for personal finance advice for women. But what many of these women don’t realise is that taking a big chunk of their super today, will have a devastating impact when it comes time to retire.
So what is the solution to this money mindset?
Know your super – It’s your money.
Finding information about your super is really simple with the MyGov ATO portal. All you need to do is sign up, and you’ll have access to everything you’ll need to know – and you might even find some lost super too.
Was withdrawing super a bad idea?
After hearing that a client has withdrawn super, my first response is always a gasp of horror – “No! Please don’t do that!”. But these people usually come to me after already taking out the funds and have often thought it through before sealing the deal.
The most common reason for withdrawing was to pay off unsecured debt or free up cash flow. When a credit card or personal loan can have a rate of 19% – 25% and investment return have significantly dropped this year, many of these people don’t regret their decision.
I’ve also had a couple that withdrew $10,000 to help buy their first home. And when they’re back working, they can quickly rebuild those funds.
What I’m saying is that withdrawing super is not always a bad idea; you just need to know a few things before you make your decision.
Caps apply to contributions made to your super in a financial year, including contributions made by your employer. If you contribute more than $25,000, you’ll be taxed 15%.
Carried forward concessional contributions
You may be able to contribute more than $25,000 if you carry forward unused concessional contributions on a rolling basis for five years from July 1 2018. That means if you didn’t pay $25,000 into your super last financial year, you can make additional contributions this year without being taxed.
I like to think of this as supers’ best-kept secret. You can split your contributions with your spouse when they are earning less. You may also receive a tax offset for doing so. It’s important to get this right, so I always recommend getting financial advice first!
Government co-contributions are a great way to help boost your retirement savings if you are earning less than $52,769 before tax. The amount of government co-contribution will depend on your income and how much you contribute.
If you are earning less than $37,000 before tax, you may also be eligible for the low-income super tax offset. Don’t worry too much about this though – all payments should be automatic.
While there is no requirement to make super contributions on Job Keeper, some of my clients are actually earning more income on the scheme or have adapted to their new income. If you find that you’ve got a bit of extra cash in your pocket while you’re on Job Keeper, you can always choose to put these funds towards your super.
Use incremental savings
There are plenty of savings apps and accounts that round up what you are spending and contribute the difference (Raiz is one of my favourites!). This is a simple way to build up your super, without noticing the missing dollars in your bank account.
There you have it. Women can be in control of their retirement, and it’s never too late – or too early – to start thinking about your super. Small actions today can have a big impact on your future, so make sure you do your research before you make any big withdrawals!
Here is a little freebie to The Happy Money Journey Workbook which can help you set up some goals to build a stronger future!