The average super balance for men and women at age 40 is $106,187 and $79,709. In other words, women only have three quarters the super balance of men. The imbalance gets even worse at older ages.
One reason for this are that on average women are paid less than men so their employer super payments are lower. The bigger reason is that women often take many years out of the workforce to be the primary carer for children. Those years with no employer contributions have a huge impact on compound interest through to retirement. Then of course there is the reality that many women struggle to find employment after years out of the workforce and often go back to work on significantly lower incomes.
Recognising this, the government have built some incentives into the superannuation system to try and address the imbalance. With rules changes over the last few years reintroducing caps on how much super you can covert to a tax-free pension in retirement, it’s more important than ever to consider these strategies.
The first strategy involves superannuation splitting. This is an annual option for one partner to split up 85% of their contributions for the previous year into their spouses account. It’s a simple strategy that allows contributions to continue going into the lower balance spouses account to ensure it grows as well. It’s a great but underutilised strategy as it involves filling out a form each year.
Another strategy is the government co-contribution. This is a bonus paid by the government to encourage contributions into a low-income earning spouses account. The bonus payment is on a sliding scale based on the receiver’s taxable income and is capped. At it’s best if someone’s taxable income is under $38,564 then the government will pay a bonus of 50% of the contributions made to a maximum of $500 per year. In simple terms contribute $1,000 of personal money over the year and get a bonus of $500 or 50% in one hit. It doesn’t matter where the money comes from.
These are simple strategies and incentives that have been around for years. Utilising them to help keep money going into a non-working or lower income spouses super can make a huge difference in retirement.
For a free consultation with local people who understand the complexities of these or any other financial matter, contact
Eclipse Financial Services at Cannonvale
on 49467359 today or visit www.eclipsefs.com
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