While new research into Australia’s workforce has revealed that more women than men are now working professionals, there is no doubt that women are still doing it tough when it comes to their superannuation savings.
The latest AMP.NATSEM Income and Wealth Report, We can work it out: Australia’s changing workforce, shows that women are now the majority in four occupation categories, especially in clerical and sales roles. The report also says that women now account for more than half (54 per cent) of people employed as professionals, in which the average income is $1,546 a week.
But despite the rise in the number of Australian women working and earning more, the average woman’s super balance is merely $33,047, compared to $48,703 for men. Women are also expected to live almost five years longer than men on average, but will have less money to look forward to.
There are some things women can do to break the super glass ceiling and set themselves up financially for life after work.
Small contributions go a long way
While retirement is hard to fathom in a person’s 20s or 30s, this is a great opportunity for women to get in early and take advantage of the generous tax benefits on offer through super. Even an extra $100 a month can make a big difference to superannuation in the long term thanks to the power of compounding interest.
Wise up financially
One of the first steps for women to take financial control is to check their super balance, look at how much they even have in their account and, importantly, how it is invested. If they are still 20 or more years away from retirement they can usually afford to opt for a more growth-oriented investment strategy. Check your asset allocation or speak to a qualified financial planner.
Salary sacrifice
This is a really effective way for many women working full-time or on higher incomes to reduce their income tax and boost their superannuation balance. It allows them to forego part of their pre-tax salary and have this paid into super at a 15 per cent tax rate. Even if a woman can afford to salary sacrifice just $5,000 (before-tax) a year into super, this will grow much faster than most other investments because of this tax concession. For those self-employed, they can achieve a similar outcome by paying more into super and claiming this amount as a tax deduction.
Co-contribution and spouse contributions
Anyone earning less than $49,488 a year may be eligible to get a free cash boost of up to $500 into superannuation through the Federal Government’s co-contribution scheme. Couples can also benefit in some cases from spouse contributions – the higher earning spouse can help build their partner’s super by contributing on their behalf and potentially receive an 18 per cent tax offset (up to $540) by doing so.
Transition to retirement
Women aged 55 and over and still working can take advantage of a transition to retirement strategy to top up their superannuation. This combines salary sacrificing and drawing on super through a pension. By using this pension to cover living expenses, a large chunk of the person’s salary can be ploughed into super, potentially providing a significant boost in retirement savings.
Consolidate super
Women who have held a few different jobs may find they hold a few different super funds as well. Consolidating multiple super funds into one account will keep fees to a minimum and mean more of their money is working for them. However, before consolidating super accounts it’s important to check if any insurance cover through super will be lost.
