Time for women to bridge the super gap!

While the women's movement has delivered many successes over the last 50 years, the area of financial independence still lags behind. The retirement savings gap between men and women, in particular, is a key area that needs to be addressed.

Many women are exposed to a substantial risk of poor retirement living standards due to the massive underfunding of their superannuation. Statistics from the Association of Superannuation Funds in Australia (ASFA) in 2009 highlights the depth of the problem and are a real wake up call.

The average retirement payout for women going into retirement is only $73,000, whereas men are more than double this amount at an average of $155,000.

What are some possible reasons for such a disparity? Women are still the primary care-givers in most families, which means their career and income are more likely to be interrupted. They may also be over-represented in casual and part time workforce, which may result in lower incomes and limited ability to contribute to super. Those who take multiple part-time jobs where they may be earning less than $450 per month in each job, are particularly worse off, because current rules say that they are not eligible for compulsory super contributions to be made by their employers.

Divorce and the high proportion of single parent families that are headed by women have added to the problem and many women remain single and are solely responsible for their own retirement saving.

It also pays people to exercise caution on a reliance on the age pension to substitute for proper retirement saving. The age pension is already under significant pressure from an ageing population and it won’t even go close to providing what most would consider a comfortable retirement income. For example, if you are currently earning a $60,000pa income, the rule of thumb is that you would need a retirement income of around $40,000pa. The age pension is not going to deliver that sort of money, so it is up to the individual to plan ahead.

On the positive side, women are generally far better money managers and more able to set goals and stick to strategies. Often, they simply haven’t found out what they need to be doing, or putting away, to fund their retirement.

To help target such retirement savings goals it is important to take advantage of whatever government incentives are available. This is where seeking some professional advice can help. There are incentives such as the spouse super contribution that allows the main breadwinner to make super contributions on behalf of a spouse who is not working or is not earning a high income. This can provide a rebate of up to $540.

For women with a higher income earning spouse, there is the possibility of splitting super contributions. Not only would this boost the woman’s super balance, it may also provide the couple with Centrelink benefits or the opportunity to access their super earlier.

Salary Sacrifice is a critically important strategy in a lot of cases.

Opportunities such as these will depend on specific circumstances and this is where advice from a professional can be useful. At times of low or interrupted income, such advice can help map out future contribution strategies and even help with transition to retirement strategies that are also tax efficient.

For further information on how you and/or your partner can better plan out your super strategies contact *Hugh Kilpatrick from RI Reservoir on 03 9471 0080.

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This editorial does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.