Making the numbers stack up for women in retirement
Women retire with 24% less super than their male counterparts.
The median superannuation balance in June 2019 for those aged 60 to 64 was around $178,800 for males and $137,050 for females. The retirement savings gap between males and females has been highlighted both in the media and in previous articles we have shared.
There are some positive changes that came into effect on 1 July 2022 with the $450 a month earnings threshold for the payment of compulsory superannuation being abolished. This will assist around 300,000 low-income earners, around 200,000 of which are women, as well as an increase in the superannuation contribution guarantee.
The reasons for the gap have been well covered, including time out of the workforce (predominantly to raise children and care for ageing parents), part-time working hours for a portion of your career and gender segmentation of the workforce with women traditionally receiving lower wages on average.
Australian women live on average 4 years longer than men, and with their lower super balances, they can run out of super much earlier. For women, it may be challenging to make the numbers stack up in preparing for their retirement, but it’s not impossible.
Do you have a plan to fund the life you want to live in retirement?
You may not know yet when you are planning to retire but if you want to break the trend of retiring with less then you need to put a plan in place. From past articles and videos, you’ll know that a common theme we talk about is “knowing your financial freedom number”.
What is it you want to do in retirement?
Is your retirement spending time in the garden, looking after the grandkids, playing more golf or bowls, pursuing your favourite hobby, travelling to see the world, exploring Australia, ticking off all the possible cruises you can go on, or all of the above! Whatever your wish list, it needs to be important enough to you, to ensure your plans for saving and investing are a priority to get you to the life you want to live. Take the time to consider this in the early stages of your retirement planning so that the right plan is put in place to suit you.
What’s next?
Once you have an idea of what you want to achieve, you can move into the next phase where you are no longer working without a vision but focused on achieving your financial freedom number to support your dreams.
Many of our clients come to us with the view that they won’t need as much to live on in retirement as they do when they are working. In reality, we’ve found, especially in the early years of retirement that, depending upon the bucket list, it can be more! So, it’s best to ensure that you separate the “living” part of the income you will need, from the bucket list and travel income goals. That way you will be safe in the knowledge that your wish list will be funded.
Putting your plan into action
Spend time planning out with your adviser how much you will need as a lump sum at retirement to be able to generate both the “living” income and the “wish list & travel” income you need and do this early. The best time to start is the present, today, not tomorrow!
Once you have clarity on the amount you will need in retirement, then you need a plan to get there. You will have a clear understanding of how much you will need to invest each month to ensure you end up with the financial freedom number that will allow you to retire. What your investment strategy looks like will depend on your risk tolerance and the level of super contributions and savings you need to achieve your goals.
Finally, the right plan will cover all of these areas and more when you discuss your specific circumstances with a trusted financial adviser.
Focus on putting your plan in place, creating your wish list or bucket list and check in regularly with your financial adviser to ensure you are on track to achieving your goals.
Remember once you retire, you’re still investing for the rest of your life, given the length of time we spend in retirement this could be 20 to 30 years or more.
So, do you have the right plan in place, does it work for you? Make sure your plan will be the right one to reach your financial freedom number to allow you to actively live the life you want to live. Reach out to the JBS Financial team here to discuss your personal situation.
Jenny Brown – CEO and Founder
Source: ASFA Pre-Budget Submission