Research shows that, on average, women finish their working lives with less money than men, often because they work part-time, take career breaks for family reasons, and earn less than men even when they work the same hours.
But there are plenty of steps women can take to boost their super savings. The key is to act early and make the most of all the help available to achieve a more financially secure retirement.
According to the Workplace Gender Equality Agency, women earn just 78 cents for every dollar a man earns. On average, women earn $26,393 a year less than men.
This plays out as a vastly reduced super balance for women over time. In 2021 the median superannuation balance for men aged 60 to 64 was $211,996, says the Association of Superannuation Funds of Australia. That’s about 33% higher than the median balance for women in that age bracket: $158,806.
Rhonda Maden, a superannuation adviser with Spirit Super, says there are other reasons why women don’t end up with as much super as men.
“Women can spend so much time caring and supporting those around them, they often don’t prioritise themselves and pay adequate attention to their own future financial situation,” Maden says. “I’ve also spoken to women who don’t want to appear uninformed by asking questions about how to make the most of the super system, or feel they have left it too late to make a difference to their future financial situation.
“I prefer to have someone come to me so I can tell them not to worry too much if you feel like you’ve left it too late. Just don’t leave it for another week. Now’s the time to understand your options and get on track.”
Pay attention to your retirement nest egg
The first step is to develop an understanding of what’s happening with your super.
“Many people are finding it hard to manage the rising cost of living and that may make it hard to add extra funds to your superannuation now,” Maden says. “Hopefully, that will change in even a few months’ time as inflation decreases. When it does, that might be the time to consider your options about adding extra to your super fund, depending on your circumstances.”
There are many ways women can add to their super balance. First, understand how much you can contribute to super on a pre-tax and post-tax basis each year. In the 2023-24 financial year, you can contribute up to $27,500 to your super fund on a before-tax basis, including the super guarantee, and $110,000 after tax. In the next financial year (2024-25), this will increase to $30,000 and $120,000 respectively.
After-tax contributions are known as non-concessional contributions and can be carried forward over three years, which means you can contribute up to $330,000 to your super fund in a single year. This may be a consideration for people who have received a windfall gain such as an inheritance or bonus.
Before-tax contributions are known as concessional contributions and include your employer super guarantee. Any unused caps can be carried forward for up to five years. This could provide a tax-effective means of catching up and building your super.
A quick calculation using Industry SuperFunds’ retirement balance projector tool shows what a difference extra contributions can make to your super balance.
Take two people who are both 30, earn $85,000 each a year, have a $50,000 super balance each, are paid the 11% super guarantee and plan to retire at 67. If one contributes an extra $25 after tax a week to their super fund until retirement, they are projected to be more than $83,100 better off at that point.
“That just shows the power of compound interest,” Maden says. “It also demonstrates the benefits of starting early when it comes to making extra contributions to your fund, to make a meaningful difference to your super balance down the track.”
Maden says it’s also an idea to think about your life stages and make extra contributions when you can. “Some of my clients add extra to their super fund while their kids are little, knowing they may not have the funds to do this when their kids get older and their expenses rise.”
Women on low incomes can take advantage of the government’s co-contribution scheme.
If you earn less than $58,445 a year and make a post-tax contribution to your super, the federal government may make a super co-contribution of up to $500 to your fund.
Plus, if you take a career break and earn less than $40,000 a year, your partner can make a contribution to your fund and receive a tax offset. Contribution splitting allows your partner to contribute up to 85% of their employer and pre-tax contributions to your fund.
As a woman, it’s also sensible to make sure your insurance settings are appropriate in case you need to rely on your life, total and permanent disability or income protection insurance that’s inside your super. These policies can help protect your assets such as your home if you suffer an illness or accident and can’t pay your bills.
If you have more than one super account, it might be a good idea to consolidate them so you’re not paying double fees. But consider insurance requirements, fees, performance and other benefits before consolidation to make sure you’re not losing out by reducing the number of funds you have.
“Review your situation and your insurance needs because you don’t want to be paying for more insurance than you need out of your retirement savings,” Maden says. “But at the same time you want to make sure if anything happens, you’re covered.”
Of course, the right super strategies will depend on your situation and retirement income goals. The idea is to look at your circumstances and make active choices around your super early in life to ensure your financial circumstances are as good as they can be when you leave work for the last time.
The information provided in this article is of a general nature only and does not constitute financial or business advice. It is important to consider personal objectives, financial situations or particular needs and to read the relevant Product Disclosure Statement and Target Market Determination when making financial decisions.
