As a woman, it’s concerning to see the stark shortfall that women have when it comes to retirement savings. On average, women retire with less money than men, and the contributing factors are complex.
Some of the main factors are women are more likely to take time out of work to look after children and/or aging parents, and the prevalence of women in casual and part-time work. These factors contribute to missing or reduced superannuation contributions, which can have a significant impact on retirement savings.
Many women are also now choosing entrepreneurship via small businesses to balance work and family commitments. While this can be a great option, it often means that women are not setting aside sufficient funds for retirement because superannuation contributions are not mandatory when self-employed.
The average superannuation balance for women aged between 55 to 64 is just $246,000 compared to $326,00 for men, according to a report by the Australian Bureau of Statistics, Household Income and Wealth, Australia, 2022. This difference means that women are at a significant disadvantage when it comes to their financial security in retirement.
It’s important to understand the power of compounding interest and the difference that even small contributions can make over time. For example, putting just $50 per week into super for 30 years with a return of 7% would equate to a future investment value of over $244,000. While this is a substantial amount of money, it remains below the Association of Superannuation Funds of Australia’s Retirement figures, which estimate a superannuation balance required for a comfortable retirement to be $640,000 for a couple and $545,000 for singles.
Making additional contributions to superannuation is an important strategy to help bridge the retirement savings gap. This can include salary sacrificing, which involves making contributions directly from pre-tax income, or making personal contributions to super.
The government also offers some incentives, such as the co-contribution scheme and the low-income super tax offset. These provide government contributions for low and middle-income earners who make personal contributions to their superannuation.
Women can also consider consolidating their superannuation accounts, which can help to reduce fees and maximise investment returns. But prior to consolidating your super, it is important to consider any life insurance you may have in your super fund, as you don’t want to lose insurance cover by closing an account. It’s important to regularly review superannuation funds and investment options to ensure that they’re aligned with individual financial goals and risk profiles.
In addition to saving more for retirement, it’s important for women to have a solid financial plan that considers their unique circumstances and priorities. This can include budgeting, managing debt, investing in property or shares, and protecting their financial future with appropriate insurance cover.
It’s important to seek out professional advice from a licensed financial planner who can provide guidance and support in achieving these financial goals. A financial planner can help to develop a tailored strategy that considers individual circumstances and provide ongoing support and advice to help stay on track.
By acting now and implementing strategies to boost retirement savings, women can bridge the gap and achieve a comfortable retirement. With the right support and guidance, it’s possible for women to take control of their financial future and build a strong financial foundation that will last a lifetime.
– Kerry Farquharson