Why you need $250,000 to live the life you want
Readers talk back
Must reads site wide
Superannuation is not at the top of the list of "sexy" subjects to discuss over a ladies' lunch.
And yet superannuation should be a sexy investment like a new car or apartment. It's the most tax-effective cash asset most of us will ever own – an investment that will give women control over how they spend their retirement years. It's the choice between scraping through with the bare minimum and living the life you want once you've retired.
Superannuation gets very real – and even a little sexy – when young women are offered a reality check on what access to a decent source of income can mean once we cease paid employment. At a media lunch in Sydney yesterday, Pauline Vamos from the Association of Superannuation Funds of Australia and journalist Tracey Spicer did just that.
What if you had no income for the last 30 years of your life, they asked.
What if you couldn't continue the lifestyle you'd always led once you retire?
What if simple choices – where you eat, what activities you pursue, healthcare providers you use, holidays you take – were significantly limited later in life by the amount of money in your bank account?
They're difficult thoughts to consider when you're in the first or second third of your life. They're even more difficult to prioritise when you're paying a mortgage, building a career and raising a family. The fact three in 10 Australian women don't know what their super balance is and 90% of us currently have insufficient super savings, according to ASFA, shows that too few of us have given such issues much consideration at all. But they're points that should be considered if you'd like some choice about how you spend your years out of paid work.
Both Spicer and Vamos shared stories of women who've worked most of their lives but ended up with little to retire on. Spicer recounted a conversation with a colleague who said she was moving back in with her mother at the age of 57, because she couldn't afford to live by herself. Spicer also recalled her own reality check when she realised just how little she'd have once she retired. "I'd been working for a long time in a well-paid job and I didn't have enough to retire on. I'd never made voluntary contributions."
Sadly, the 17.5% gender pay gap combined with breaks from the workforce associated with maternity leave means women are at a considerable disadvantage to men when it comes to the funds they have to retire on. A 2012 Suncorp-ASFA Super Attitudes Survey found women hold just 37% of Australia's total super account balances.
In line with International Women's Day, ASFA is encouraging women to start thinking about super. It's a big job given 81% of us "are not currently engaged" with our super, according to ASFA/Suncorp research. A new independent website called Super Guru, which provides information and tools to get the most out of their superannuation, should help.
According to Vamos, women need to accumulate $250,000 in super by the time they retire, in order to supplement the pension (giving them a total of $500,000). That's a lot of money to earn when you factor in career breaks, a slow start on salary and numerous debts associated with education, property and raising children. Indeed, for most of us it's almost impossible without making voluntary super contributions on top of compulsory savings.
For women planning to take two years out of the workforce while raising children, Vamos recommends they contribute an extra 1% over the course of their working life. She adds that while it'd be sensible for school-leavers to start making voluntary contributions – and she makes such contributions on behalf of her own daughters as a "Christmas present" each year – the reality is that most women will wait until they've finished university and joined the workforce in a full-time and secure capacity before making such contributions. All women, at least by the age of 25, should be considering their super.
So what can you do right now? Here's what ASFA recommends:
- Roll you super accounts into one. You need to know your tax file number.
- Get excited about your super. Check your account balance and insurance arrangements regularly, remembering that it's your money and you have the right to know how it's performing.
- Build it up. Make voluntary contributions and pay an additional 1% if you've had/are considering having children.
Can't be too difficult. I may even try it myself.