Closing the not-so-super 46.6% gender gap
Many Australian women face an insecure retirement, according to a recent Senate report into the yawning gap between men's and women’s retirement savings.
The report, A husband is not a retirement plan: Achieving economic security for women in retirement, notes that in financial year 2011-12, women had an average $105,000 superannuation balance when they retired. For men, this figure was almost double, at $197,000, a gap of 46.6%.
The report outlines 13 recommendations to address this, including paying super in the paid parental leave scheme, re-thinking super tax concessions to help women build their retirement savings and changing the superannuation guarantee.
While there’s a lot to be done to improve policies, there are a number of things women can do to boost their retirement nest egg.
Know your tools
The Australian Securities and Investments Commission has a great tool called MoneySmart that you can use to work out the likely effect of your contributions on your future superannuation balance, and how to boost that balance. It’s also worth checking the Australian Taxation Office’s website, which has information about superannuation according to different income and age brackets. But it is probably also a good idea to see an accountant to make sure you’re taking advantage of all that's available to you.
Accountant Melissa Browne, founder of Accounting and Taxation Advantage and author of More Money for Shoes suggests that you consider salary sacrificing into your super fund early in your working career. Salary sacrificing involves setting aside part of your pre-tax income to contribute to your superannuation. This effectively lowers the value of your salary, and also the tax you pay.
Any money you contribute to your super fund, though, cannot be accessed until you retire, unless you are faced with exceptional circumstances.
“Salary sacrificing is a good way to build up your nest egg so that, if you do have a career break, you've created an extra amount in your super fund,” Browne says.
Contribute – even if you're an owner
“If you're running a business, continue making super contributions at least equivalent to the super contributions you'd be receiving if you were working for a company,” Brown says. “Too many business owners aren't paying themselves super because it's not necessarily compulsory if you're not paying yourself a wage, or you're a sole trader.”
Explore other options
Don’t forget super isn’t the only environment in which to build wealth. There are lots of ways to save outside the relatively restrictive superannuation environment.
Melissa Browne suggests taking advantage of tax structures to ensure you maximise your income. For example, if you are investing and have a higher income, you might consider using a trust to house your investments.
If your risk appetite is higher, taking advantage of negative gearing rules to borrow to buy a property, inside or outside super, is another way to grow wealth.
Ms Browne says there are plenty of ways women can boost their savings. “I know many women who have built incredible businesses because they've backed themselves and have used the profits to maximise contributions to super, buy investment properties, set up self-managed super fund investments and be really savvy about not just working hard but investing,” she says.
“In a few cases, these women’s husbands have left high paying jobs to join them in the business because they're doing so well.”
She has a client, whose husband is a builder, who has been really smart about flipping properties and buying shares. This client has exposure to two different asset classes, property and equities. That gives her investment portfolio some diversification, so she’s protected if the share or the property markets fall.
Another woman moved house so she could save.
It could take some time before the gender gap in retirement savings is closed. In the meantime, there are steps women can take to put themselves in a stronger financial position.