Taking a career break to raise kids has been identified as the most significant barrier to having sufficient retirement savings, according to the latest MLC Quarterly Wealth Sentiment Survey.
In the June quarter, ‘career break to raise kids’ increased by a staggering 70% to take out the top spot impacting sufficient savings in retirement. Previously, unemployment and major health issues have consistently ranked highest.
Women rated a career break as their number one barrier (rated 70 out of 100) to retirement savings while men ranked it third overall (54 out of 100), behind unemployment and major health issues.
The survey of more than 2,000 Australians also found the level of concern about financial sufficiency in retirement rose this quarter, with over half of participants saying they would not have enough to retire.
Women still worry more about superannuation and investments compared to men, and this concern has risen across all categories compared to the last three quarters.
While the level of concern has increased, the survey also found around 25% of women who are more than five years from retirement are not investing at all.
Commenting on the findings, NAB Wealth General Manager of Client Management Lara Bourguignon said: “With just 5% of Australians confident they will have enough money in retirement, the gap in retirement savings will be one of the biggest challenges facing our ageing population.”
“Families, and particularly women, concerned about the impact career breaks will have on their retirement savings should plan ahead as there are strategies that can minimise this financial shortfall."
For women, the average career break is about five or six years. AustralianSuper offers the following advice to mothers planning a career break and how they can protecting their retirement savings during this time.
Ways to protect Super:
- Put a lump sum into your super before you stop work.
- If you have a partner, they can help make sure your super does not fall behind by adding to your super for you. This can have tax benefits. They may be able to claim a rebate in their tax return – they can put in up to $3,000 to your super and get a tax rebate of 18% (up to $540) if you earn less than $13,800.
- You can continue to add to your super yourself – using Bpay® or direct debit directly from your account.
- If you earn less than $49,488 per year, the government may add to the super you put in from your after-tax pay. This is called a co-contribution. For every dollar you contribute, the government puts in 50 cents, up to a maximum of $500.
- Protect your income! Before you leave work, check on your insurance cover. You need to make sure you have insurance that will give your family security if you can no longer financially support them.
Other ways to have a successful career break:
- Explore your options carefully before you plan to leave work, and talk to your employer about any entitlements you may have including paid parental leave, annual leave, long service leave or unpaid leave.
- Plan for the break financially, including the maximum time you expect to be out of work.
- Plan your comeback. Try to picture how and when you will return to work. You can spend time on a career break for further career development.
- Find a mentor who has taken a break who can advise you on the best time and way to get back to work.
- If you’re having a baby, get child care organised well before your start date.
- Before you take a break, let people in your network know about your plans.
- During your break, keep up a support network – both personal and professional – to boost your confidence and maintain your professional profile for when you go back.
- When you make the leap out of the workforce, be ready to adapt, as it may not work out exactly as you planned (like all big projects).
- Use your network to help you keep a positive outlook and stay motivated, both at the time of leaving, and returning back to work.