The struggle is real for women who are balancing careers, homes, and families. However, as retirement approaches, the dream of reaping the rewards of all that hard work often turns into a harsh reality. Unfortunately, retirement savings fall short of supporting the envisioned lifestyle, painting a bleak picture for the future.
“Women with lower levels of financial knowledge experience more financial anxiety, particularly those who struggle with goal setting and financial planning. However, women exhibit a stronger ability to save and budget than men, which can result in a better retirement. Feeling in control of your finances and understanding super savings are important elements of retirement confidence,” says Christine Swanson, Founder and Financial Adviser at Prominent Financial.
Consider this: on average, women retire with only half the retirement savings of men, as revealed by the inquiry into Women’s Economic Security in Retirement titled “A husband is not a retirement plan: Achieving economic security for women in retirement”. The inquiry further discovered that a significant portion of Australians on the age pension are women, with the majority being single. This means that these women are left to fend for themselves on an income that the Organisation for Economic Co-operation and Development (OECD) classifies as poverty.
What About Super?
It’s a double whammy for women whose careers were interrupted to raise children. Unfortunately, time off work means there’s less money being contributed to the super pie. Unpaid parental leave translates into no employer super guarantee (SG) contributions. To make matters worse, when they do return to the workforce, managing the school run often means women are working part-time. Currently, employers are not required to pay the SG if the employee is earning $450 or less before tax in any calendar month. Before 1 July 2022, employers did not have to pay a super guarantee for workers earning less than $450 a month. They now have to pay regardless of their earnings.
So, even once she returns to her job, chances are she’s still not contributing to super. In fairness, though, this is a stage of their lives when young families often have other things on their minds besides superannuation, and parents are happy to have this little extra in their pockets.
So What Can Be Done?
The answer lies in planning and budgeting. Over recent times, the federal government has implemented measures designed to help low-income earners – particularly women – by supporting and encouraging even the smallest contribution to retirement savings. They include:
- Spouse Tax Offset: If your spouse is earning $37,000 per annum or less, making contributions to her eligible super fund can attract a tax offset of up to $500 per annum. This amount gradually reduces for income above $37,000 and phases out when income reaches $40,000 per annum. This means that a contribution to your wife’s super fund can benefit you both.
- Low-Income Super Tax Offset Contribution (LISTO): This replaces the former Low Income Super Contribution (LISC). Eligible individuals with an adjusted taxable income of $37,000 or less will receive a contribution equal to 15% of their total pre-tax super contributions for an income year. Although capped at $500 per annum, this scheme encourages even the smallest super contribution, meaning it’s possible to continue contributing to super while on parental leave or if you’re a sole trader. Every dollar will make a difference as compounding applies over the years.
There will be many reading this who believe it’s too late! The fact is, it’s never too late to develop a financial strategy that can help you achieve your goals. Governments are beginning to acknowledge women’s financial needs. However, independence means taking control and building your own plan, too.
Professional financial advice will help you get on track and through a combination of government policy and personal financial strategy.
‘Taking the time to discuss your financial position and objectives with a trusted financial adviser can place you in the best possible position, you will be amazed on how much you can achieve in a short time span, but more importantly understanding what financial position you will be in allows you to plan around it and it avoids unnecessary shocks, says Christine Swanson.
There are things you can do to take control of your financial future and make your retirement dreams come true. Reach out to our financial advice team here.
