According to research by Deloitte, a large number of Australians will not retire with enough superannuation to fund their retirement, and will likely have to rely on family, friends and the Government Aged Pension to support them in their most vulnerable years.
For women, and mothers in particular, the road to retirement can be even steeper.
Women tend to live longer than men, meaning they need to fund a longer period in retirement. On average, female members of the superannuation fund I head, REST, spend 37% more time in retirement until they reach their life expectancy age of 84.3 compared with male members who have a life expectancy age of 79.9.
Women also face a number of challenges when it comes to accumulating super.
Typically women are on lower pay than men, meaning they receive less in super and have less money to spare. A large proportion of women also take time out of the workforce to raise and care for children. Any time out of the workforce means time without super, unless women take action themselves to counteract this.
What all of this adds up to is that although men and women usually retire at the same age, women can end up with a lot less super than men. Our male REST members retire with around 20% more in their REST super account than female members.
This reality is worrying enough already, particularly for mums who need to juggle the financial demands of raising a family, to maintain a comfortable lifestyle and to put some money aside for long term savings.
But the situation just got a whole lot worse, with new government legislation brought in recently which will significantly impact saving for retirement.
New legislation has been passed which freezes the increase in the superannuation guarantee brought in by the previous government.
This means that the compulsory superannuation contribution made by employers for their workers, which was to rise to 12% of salary by 1 July 2019, will now be stuck at 9.5% until 30 June 2021. The contribution won’t get to 12% until 1 July 2025 under the new rules.
Delaying the planned superannuation guarantee increase will hit those who are already at risk of retiring with less super the hardest. This includes women, lower-income, part-time and casual workers.
In addition, the Low Income Superannuation Contribution scheme, which allows Australians with a taxable income of less than $37,000 per year to essentially receive a rebate of contributions tax of up to $500 paid into their super fund, will be scrapped from 1 July 2017.
Given that a higher proportion of women tend to fall within this income bracket than men, particularly mums working part-time or taking breaks from work to care for family, this move will hit women hard.
Faced with what seems like an uphill struggle, exacerbated by these new policy changes that seem to unfairly disadvantage women, it can be easy to push super to the back of the mind and put it in the ‘worry about it later’ file.
But this is not advisable. Putting saving for retirement off will only make it more painful at a later stage in your life.
However busy you are, there are a number of simple things women can be doing now to ease the stress of saving for retirement later on.
1. Don’t double up
Check you are not frittering your retirement savings away with fees from more than one super fund. Consider combining your super into one fund and save on fees.
2. Maximise career moves
Consider using opportunities such as changing jobs or getting a pay rise to contribute a little extra towards your super. If you do it when your pay cheque is already changing, you may not notice the difference in your take home pay! And if you are changing jobs, don’t forget you can take your super with you.
3. Think about your options
Consider making personal contributions to your super before, during or after family career breaks to balance out your time away from employment. Another option is to explore the possibility of your partner or spouse making contributions to your super on your behalf when taking time out of work to care for family.
4. Call in an expert
No one expects you to be a super expert, but there are people that are. Many super funds offer a free financial advice service – consider using it!
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This article doesn’t take into account your objectives, financial situation or needs. Don’t forget that when you are considering this article and REST Industry Super, you should consider the appropriateness in regards to your own objectives, financial situation and needs.
This article was supplied courtesy of REST Industry Super. For more information visit www.rest.com.au.