Super Smart: Know THIS About Your Retirement Fund
When you’re still figuring out how to get that house deposit, worrying about your superannuation can seem like a problem for another day. But with one in three Australian woman retiring with nothing in their funds, it’s time to get savvy about super.
Just this morning, I got an email from one of my superannuation funds. I didn’t delete it, which for me, signals progress.
I was so lazy while in university and through my early career I just ticked the ‘default’ super box while completing induction forms. By the time I turned 30 I had somewhere in the vicinity of six super funds into which my cash was being directed. (Keep reading and you’ll see this is one of the most classic mistakes you can make).
It was only after a relationship breakdown forced me to assess my financial status more closely. I started to have an awareness for the first time of how much money was even being held for me. It’s dire I know, but I’m not alone.
It was only after a relationship breakdown forced me to assess my financial status more closely
Women in Australia retire with about $150,000 less in the bank than men. One in three have no superannuation on retirement. Yep, literally zero. To put that first stat in perspective, if you earn more than $110,000 a year in Australia, you’re technically in the top ten per cent of the salary bracket. If you don’t adjust your lifestyle, you will run out of money in about a year.
So yep, this is a big issue, and one we (literally) can’t afford to ignore.
Over the course of two articles, irislillian.com will share expert advice with you on how to arm yourself a little better for a healthy financial future. Please note the information we’re sharing with you – although provided by a financial planner – should not be relied on. You should definitely seek out your own expert advice locally if you are making steps to make your super, well, more super.
According to the Association of Superannuation Funds of Australia, while about 25 per cent of men knew their super balance, only 15 per cent of women do, with a third saying they needed to know more. Fewer than one in ten women knew how much they would need to retire on, and only one in ten said they truly understood what those pesky super statements actually meant.
I started to have an awareness for the first time of how much money was even being held for me. It’s dire I know, but I’m not alone.
Why do women end up with less superannuation than men?
It’s complicated. But usually, it comes down to long periods of not working while bearing and caring for children; and associated breaks, shifts and impediments to career and career direction that result: think bosses who might assume you’re no longer as ‘ambitious’ as you were pre-kids, or your own decision to step into part-time rather than full-time work because it suits your family better.
Financial planner and our go-to guy on super Steven Iremonger adds: “In the case of a stable family unit, these issues typically aren’t a problem. Unfortunately, we have a high rate of relationship separations and breakdowns which have a massive impact on savings for retirement,” he said. This process can be financially and emotionally destabilising if the separation gets nasty, and that’s where the trouble can start.
“For the women that I have personally known who have experienced a difficult separation, they will tend to go through a period of shock and lose self-confidence. Sometimes this may mean that they are not active enough to ensure that they receive their equitable share of the joint assets. If they have not taken prior participation in the joint financial affairs they may have an information disadvantage and not be fully aware of the current financial position.”
Some key things to know, even if you are happily coupled up:
- Superannuation is fully included as an asset in a break-up and can be split
- Ensure that in the case of a separation, you receive your full share of the assets
- The average share of a wife/spouse’s share of assets at separation is 55 per cent
- Financial stress is one of the biggest causes of relationship breakdowns in the first place
- You can regularly split your contributions to keep things equitable
- Get income protection so you’re covered if you have to stop working
- Don’t rely on your spouse/parents/significant other to be in the know on everything financial.
- Know what types of contributions you can make if you have the cash flow available in your budget – either a lump sum amount for the Government Co-Contribution, making the primary income earner make super contributions to the low-income spouse to receive a tax offset and finally, making concessional contributions to super when your income tax rate is higher.
On your own? Get savvy. If you don’t know how much super you have got, make it your business to find out. Learn to read your statements. And if you have more than one fund, consolidate.
Ensuring you know how much insurance you have, what it covers and if it is cost-effective is critical, Iremonger said. “Multiple funds with low-quality insurances can have a serious impact as the premiums add up.”
“If you don’t know what you have, how you are invested, or the cost to invest; how can you possibly know if you are on the right track? Consolidating super provides the key benefits of simplicity, knowledge of what you have and making it easier to make decisions now and in the future.” He’s got a point. His advice?
Why do women end up with less super than men? It’s complicated. But usually, it comes down to long periods of not working while bearing and caring for children;
“Just register for the MyGov website and use the Australian Tax Office link to show a list of your funds. You can request consolidations directly, but make sure you aren’t losing insurance that you really need. Every fund is different so seeking financial advice can assist in improving the decision-making process. For example, most people know industry funds tend to have lower fees, but the fees and investment outcomes vary a lot. As with insurance, they are not all like-for-like.
For those who are likely to procrastinate and put it at the bottom of the pile; just get it done and then you won’t need to worry about it for years.
His parting thought: “Take an interest in it. If you have no interest then you have no control and no point of reference to make decisions.” No truer words spoken.
In part two, we’ll cover more nuts and bolts like ethical investing, what to tell the 17-year-olds in your life about super and how to make sure you’re avoiding fees. Now go and take care of your super business.
Have you got your financial affairs in order? Share your thoughts below about the next steps you’re going to take/or have taken to get your retirement fund on track.