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 if 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 most 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, or to look after elderly parents, but unfortunately, time off work means there’s less money being contributed to super.
Unpaid parental leave translates into no employer super guarantee (SG) contributions. To make matters worse, when women do return to the workforce, ongoing carer duties mean women are often working part-time. Thankfully, from 1 July 2022 the previous minimum $450 of earnings per month will be removed, and all eligible employees will be paid the SG.
However, even once she returns to her job, chances are she’s still not contributing sufficient funds to super.
For some women, starting up a home-based business presents a viable option. However, sole traders are not required by law to pay superannuation to themselves, and many sole traders find they are utilising all their income to operate and build their business.
So, what can be done?
The answer lies in planning and budgeting.
Over recent times the federal government has implemented measures designed to help low-income earners – particularly women – by supporting and encouraging even the smallest contribution to retirement savings. They include:
If your spouse has income of $37,000 per annum or less, making contributions to her eligible super fund can attract a tax offset of $540 per annum for you. 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 if certain requirements are met.
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.
- Government co-contribution
If your assessable income if below $41,112 and you meet certain requirements, you can make a personal contribution to superannuation and receive the government co-contribution of up to $500. The co-contribution amount is gradually reduced for income above $41,112 and phases out when income reaches $56,112.
Professional financial advice can help you get on track and through a combination of government policy and personal financial strategy, you can implement a plan to help your retirement dreams come true.