The superannuation system is based around an individual working full time for forty years. For many women, especially mothers this simply does not reflect our working lives. Many of us take career breaks, some for substantial periods of time and many of us, when we do return to paid work, opt for part time positions. These factors hamper our ability to contribute to our superannuation balances. The end result is that the current median super balance for women aged 35 to 44 is around $22,600 versus around $41,000 for men.
So what strategies can you use to make sure you have enough for retirement? Making additional contributions pre baby or ramping up contributions when you return to work are probably the best way to increase super balances and make up for a break in employment. It’s important to remember that a small increase in contributions can make a big difference when invested over 20 years. Pre tax contributions organised through your employer attract a 15% concessional tax rate, but make sure you do not contribute more than $25,000 in one financial year (if you are under 50) otherwise that concessional tax rate is lost.
If you earn an annual income of less than $31,920, you could look to take advantage of the government’s co-contribution scheme. Under the scheme, you can make up to $1,000 of after tax contributions and the government will give you 50 cents for each dollar contributed. That is an instant investment return of 50%! The cut-off for the full benefit is an annual income of $31,920, but the benefit reduces until an annual income of $46,920, where it cuts out all together. (These figures are for the 2012/2013 financial year)
Make sure you are proactive in your superannuation choices. Retirement seems like a long time away, so it is easy to have a set and forget type of attitude. Have a look at your superannuation balance and check how much fees you are being charged. An extra 1% in fees per year, doesn’t seem like much but it can really eat into your super balance when you are investing over 20 years. By law, everyone now has a choice as to which fund your super contributions are paid into. You are no longer locked into your employers default fund, so use that ability to choose if necessary. Also consolidate any super you have in multiple funds into one fund as it will immediately reduce any administration fees you are paying. There are billions of dollars of lost super, stuck in forgotten accounts. Some of this money might be yours. So use the ATO’s SuperSeeker, to see if you have any lost super. SuperSeeker can be found at the following link ATO SuperSeeker.
Education and awareness are key to helping us close the superannuation gap. Talk to younger women about motherhood and the impact it has made on your working life. To be honest, before Miss Money was born I did not think very much about the impact on my ability to work, it would have been nice to give this more thought pre baby. It is our job to educate ourselves, our fellow women and most importantly our daughters to make sure we are all aware of the issue and make good choices for our superannuation.
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