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 SG for employees earning $450 or less per calendar month. As from 1 July 2022, eligible employees will be paid the SG even if they earn less than $450 per month.
So, even once she returns to her job, chances are she’s still not contributing to super.
At this stage of their lives, young families prioritize things other than superannuation, and the little extra in their pockets makes parents happy.
For some women, starting up a home-based business presents a viable option. Most sole traders manage to find something better to do with 10% of their income, as they are not required by law to pay superannuation to themselves.
What Can You Do About It? Taking Action on Your Superannuation
The answer lies in planning and budgeting.
The government has implemented measures to encourage even small contributions to retirement savings, particularly for low-income earners, including women. 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). Low-income earners with $37,000 or less in adjusted taxable income get a 15% contribution of their pre-tax super contributions yearly.
The scheme allows minimal super contributions, even during parental leave or for sole traders, with an annual cap of $500. 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. Nevertheless, independence means taking control and building your own plan too. Professional financial advice, combined with government policy and personal financial strategy, can help make retirement dreams come true.
Book a cost and obligation-free financial planning appointment today: https://bit.ly/your-right-choice.
Visit our website to learn more: https://rightchoicefinancial.com.au/