There is a startling financial divide between men and women in Australia today.  Did you know? The facts can be confronting but they are worth familiarising yourself with – as a way to motivate you to take direct action to improve your own circumstances and also check on your fellow business women colleagues and friends.

• Women, on average, retire with around half as much super as men – a difference of over $90,000.
• In 2010, 1 in 5 women yet to retire had no super at all
• Around 90% of women will retire with inadequate savings to fund a comfortable retirement.
• On average, women retire before men and are in retirement longer than men.
• Women earn on average $700,000 less than men during their lifetime
• On average, women earn almost 19% less than men for the same work

This happens for many reasons, including:

• Women are more likely to have an interrupted working life, due to the responsibility of caring for family members
• Some women may not work at all or only work part-time
• Women tend to get paid less

All of these things have a negative impact on overall career earnings, and women’s preparedness for later retirement income.

But the good news?

It’s never too late to regain control of your financial future.

Superannuation

Key benefits:

Superannuation is a tax-effective vehicle to build wealth.  It offers 15% tax on concessional super contributions and investment earnings, compared to tax on other investments, which could be as high as 49%.

1. Consolidate Superannuation

Make your money work harder for you and avoid multiple fees.  Be aware of exit fees and other charges that may apply.  Check if any benefits, such as insurance, will be lost if you leave the fund.

2. Salary Sacrifice

Contributing part of your pre-tax income into superannuation reduces the income tax you pay today and increases your overall savings for retirement.

3. Government Co-Contribution

The government will contribute a maximum amount of up to $500 for people earning $35,454 or less and those who make a personal after-tax super contribution of $1,000.

The government co-contribution amount reduces if you earn more than $35,454 and cuts off for those earning a total income of $50,454 or more.

4. Spouse contributions

This strategy allows a higher-income earning spouse to make after-tax contributions into a lower-income earning spouse’s super fund to boost their retirement savings.  If your assessable income is $10,800 or less, your spouse receives an 18% tax offset (up to a maximum of $540) on the first $3,000 of their after-tax spouse contribution.

5. Choose the right investments

Invest to grow your wealth and/or provide an additional income stream.  Define your goals, draw up a budget, choose the right investment to suit your budget and lifestyle and recognise the level of risk you feel comfortable with for different investment types.

There are 4 main asset classes: cash, fixed interest, property and shares.  Cash is good for short-term goals.  There is little risk in losing money over short periods of time.  Bonds can potentially offer better returns but can be affected by interest rates.  Property investments are higher risk than fixed interest investments but less than shares.  Shares have the potential for the highest return of all asset classes over the long term, they also have the highest risk of loss on your investment as the value of shares can rise and fall due to economic and industry conditions.

6. Diversify

The golden rule is:

Don’t put all your eggs in one basket.  

Build a balanced portfolio by investing in a combination of asset classes.  Diversification reduces the risks with investing over short periods of time, by not having all your money in one type of investment.  High returns from one investment may offset poor performance in another asset class and provide more consistent overall returns.

7. Transition to Retirement

If you have reached your preservation age (currently 55), you can access your superannuation without having to retire permanently from the workforce.  This can be used to top up your income or maintain your income and reduce your work hours or use the additional income to boost your retirement savings by contributing back in to superannuation.

8. Increase knowledge

Educate yourself or considering engaging with a good financial adviser who will guide and teach you.

Andrea Jenkins is a Certified Financial Planner and member of the AFA. If you’d like to learn more about how to take control of your own financial future, you can connect with her on LinkedIn.