Ask any woman juggling career, home and family and she’ll tell you it’s a hard slog. Yet as retirement looms, dreams of enjoying the rewards of all that work are shattered as the retirement savings don’t support the vision.
According to an inquiry into Women’s Economic Security in Retirement entitled “A husband is not a retirement plan: Achieving economic security for women in retirement”, on average, women retire with approximately half the retirement savings as men. The inquiry also found that the majority of Australians on the age pension are women. Of that number, the majority are single, meaning that these women are struggling alone on an income that the Organisation for Economic Co-operation and Development (OECD) defines as poverty.
What about super?
It’s a double-whammy for women whose careers were interrupted to raise children, but unfortunately, time off work means there’s less money being contributed to the super pie.
Unpaid parental leave translates into no employer super guarantee (SG) contributions. To make matters worse, when they do return to the workforce, managing the school run often means women are working part-time. Employers are not required to pay the SG if the employee is earning $450 or less, before tax, in any calendar month.
So, even once she returns to her job, chances are she’s still not contributing to super.
In fairness though, this is a stage of their lives when young families often have other things on their minds besides superannuation, and parents are happy to have this little extra in their hands.
For some women, starting up a home-based business presents a viable option. Given that sole traders are not required by law to pay superannuation to themselves, most manage to find something better to do with nine percent of their income.
So what can be done?
The answer lies in planning and budgeting.
From July 2017, changes to some of the superannuation laws came into effect. These measures are designed to help low income earners – particularly women – by supporting and encouraging even the smallest contribution to retirement savings. They include:
- Spouse tax offset
If your spouse is earning $37,000 per annum or less, making contributions to her eligible super fund can attract a tax offset of $540 per annum. This amount gradually reduces for income above $37,000 and phases out when income reaches $40,000 per annum. This means that a contribution to your wife’s super fund can benefit you both.
- Low income super tax offset contribution (LISTO)
This replaces the former Low Income Super Contribution (LISC). Eligible individuals with an adjusted taxable income of $37,000 or less will receive a contribution equal to 15% of their total pre-tax super contributions for an income year.
Although capped at $500 per annum, this scheme encourages even the smallest super contribution, meaning that it’s possible to continue contributing to super while on parental leave, or if you’re a sole trader. Every dollar will make a difference as compounding applies over the years.
There will be many reading this who believe it’s too late – yes, blokes too! Fact is it’s never too late to develop a financial strategy that can help you achieve your goals.
Governments are beginning to acknowledge women’s financial needs, however independence means taking control and building your own plan too.
Professional financial advice will help you get on track and through a combination of government policy and personal financial strategy, retirement dreams can come true.
For further advice on maximising your super, contact Leenane Templeton on (02) 4926 2300 or email success@leenanetempleton.com.au.