Why Retirement planning is harder for Women

A recent report by UniSuper Australia estimated the average women will retire with 34% less in super than the average man. Career breaks, the gender pay gap and age-related factors contribute to this disparity and make retirement planning for women tricky. While there’s no easy solution, it’s worth having strategies in place to keep you in charge of your financial future.

Career breaks

We know women generally take more career breaks throughout their life than men – whether it’s to raise a family, take care of a parent or return to study, so it’s important to consider the impact these breaks will have on your super.

Career breaks can last months or years, and with time away from the workforce it’s likely you won’t receive super from your employer.

These missed contributions, together with years of investment returns (and compound interest), can have a significant effect on your balance at retirement.

If you’re planning a career break or are worried about the impact of a past one, the following strategies may help keep your super on track.

You may not be able to spare much, but a little can go a long way:

  • Make salary sacrifice contributions before you go on leave. This is an arrangement between you and your employer, where your employer agrees to put an additional portion of your before-tax salary into your super.
  • Make voluntary contributions while you’re on your career break. These are after-tax contributions you make directly to your super account.

If you have a partner, you can also take advantage of the following schemes:

  • Contribution splitting allows you to split certain super contributions with your spouse. For example, if you’re on maternity leave, your spouse may be eligible to split up to 85% of their concessional (before tax) contributions, giving you more financial security for your retirement.
  • Spouse contributions enable your spouse to make non-concessional (after-tax) contributions to your account on your behalf, for which they may receive a tax offset of up to $3,000 if you earn $40,000 or less a year.

Gender Pay Gap

Women also have the additional challenge of the gender pay gap.

The gender pay gap is the difference between the average of all male and female earnings, expressed as a percentage of male earnings. It’s usually calculated on full-time weekly earnings before tax. The Government’s Workforce Gender Equality Agency estimates that Australia’s gender pay gap is currently 14.1%.

As your employer super contributions are based on a percentage of your income (e.g. 9.5%), the gender pay gap affects super too. And with women generally retiring earlier and living longer, whatever super you have in retirement really needs to go the distance. Understanding how your attitude towards risk can help you choose the most suitable investment options for your retirement needs.

Retirement Adequacy

UniSuper Australia want to help women tackle challenges of financial security in retirement and have developed a dedicated resource hub with tools and information for women who are keen to make changes to improve their retirement outcome.

It’s never too late to make a difference. If you need help planning your retirement the experts at Highview can help you achieve your best possible retirement outcome. Email us today: financialplanning@highiew.com.au

Article source: UniSuper Australia