Superannuation might be a dull topic but from my experience, women are becoming more engaged with their retirement savings and importantly they want to know how they can take action to improve their financial wellbeing.
If this is you, then there are probably a good dozen or so things that you could be doing better, so here’s what to think about.
Questions to ask your employer about superannuation
If you want to build your retirement savings, here are three things to ask your current, or even prospective employers on superannuation.
- Does your employer pay more than the compulsory Super Guarantee (SG)? (Standard is 9.5%)
- Do they pay superannuation on paid or unpaid parental leave?
- Is there an opportunity to link performance bonuses with additional employer super contributions?
Time for women to engage with their super
As the latest Financy Women’s Index for the March quarter showed, women retire with about 34% less, on average, in superannuation savings than men.
This shortfall is primarily due to women taking career breaks to be the primary carer of children.
Of course there’s more to it, such as women tending to earn less than men and working part-time.
But it’s not just women facing a superannuation shortage and a common link is engagement – or lack thereof.
Consider these questions in your 2019 superannuation “how engaged are you” review:
- What’s your superannuation balance and do you have multiple accounts?
- How much are you paying in fees?
- Are you paying for appropriate insurance cover to protect you from adverse events?
- When did you last check if your investment choice was actually right for you?
- Have you kept your beneficiaries up to date?
- Have you ever topped up your super or considered salary sacrificing?
- Did you know that you may now be able to claim a tax deduction for your personal superannuation contributions?
- Are you eligible for a Government Co-contribution?
- And do you know how much you need or want to retire on?
The ASFA Retirement Standard December 2018 quarter figures indicate that many of us won’t have enough in superannuation to retire comfortably.
The average couple aged around 65 needs $60,977 per year and singles need $43,3171.
That means if you hope to live a good 20 years in retirement, what’s needed is around $1 million with or without a partner.
Most of us aren’t even close to that amount. The latest data from the Australian Bureau of Statistics on gender balances in super, from the 2016 financial year, shows, that the average balance for those aged 15 and over was $101,700 for women, compared to $153,000 for men2.
Such statistics are often cited in the hope of sparking a call to action that not only gets us more engaged with our superannuation but also gets us thinking about how they can build their own retirement wealth.
How to take advantage of super rule changes
For those who want to take action now, here are some of the measures introduced or which took effect in 2018 that have the potential to significantly boost your superannuation savings.
- From July 2018, a new measure allows unused concessional super contributions to be accumulated over five years. While the annual limit on concessional contributions is $25,000, individuals can make use of up to five years of previously unused contributions, provided the individual’s total super balance is less than $500,000. This measure is expected to really help women returning to the workforce after taking time off to have children, giving them the ability to ‘catch-up’ on super by making higher concessional contributions without breaching the annual cap.
- 2018 was also the first calendar year that women could unlock the extended spouse contribution tax offset. This tax offset could become available to the higher earning partner in a relationship if they make super contributions on behalf of their lower earning partner, as long as the lower earner has an income below $40,000. The full tax offset will now be available where the lower earning partner has an income of $37,000, an increase from the previous $10,800.
- Women in retirement who need to boost their super may also benefit from the downsizing into superannuation rule change that took effect in July 2018. This makes it possible under certain conditions for over 65s to top up their super by up to $300,000 by using the proceeds from the sale of their home.
So there are options available that could help you reconnect with and build on your superannuation in 2019. But it’s a good idea to seek advice to see which options suit your individual circumstances.
All that’s needed is for you to make a start.
This Financy article was first provided to AMP and it has been republished and updated here with permission.