Women: How to avoid poverty in retirement | Women's Agenda

Women: How to avoid poverty in retirement

The average woman has around $35,000 less in superannuation than the average man and just over a quarter of women aged 15-69 who have been employed at some point in their lives, don’t have a superannuation account to their name.

This is according to the Australian Bureau of Statistics, which has released its latest, ‘Gender Indicators’ report, exploring the differences between males and females and how their economic and social conditions are changing over time.

Those without super may include people who are self-employed and have not been paying themselves super, those who may have worked prior to the introduction of the compulsory superannuation guarantee in the early 90s and those who are employed but do not quality for superannuation guarantee contributions because they earn under $450 each month.

Without enough superannuation (or retirement savings) to entirely self-fund your lifestyle in retirement, the Government says you may be eligible for age pension of up to $827.10** a fortnight – or just $623.40** each if you’re part of a couple.

That’s up to $413.55 a week for singles or $311.70 a week for partnered pensioners – and if you don’t have sufficient retirement savings, that’s what you may end up having to budget on in retirement.

Today, self-funded retirees are still in the minority despite the introduction of compulsory super more than 20 years ago.

Only 10.3 per cent of women 65 and over cited superannuation or annuity as their main source of personal income say the ABS, compared to 17.4 per cent of men.

For professional women, the working years are the time to be actively contributing to superannuation so you can live a better quality of life in retirement.

Of course, most of us have mortgages to pay, some have kids to raise and all of us have taxes to pay. But despite these pressures, if you don’t want to become part of the poverty statistic in your golden years you need to take super seriously and start planning now.

You’re never too young or too old to plan for retirement – here are the three most important things you can do, starting today:

Work out what you’ll need

As a rough guide, singles need $22,654 a year to live a modest lifestyle in retirement – or $41,197 a year to live a more comfortable lifestyle. Similarly, couples in retirement need to budget $32,656 for a modest lifestyle or $56,406 for a comfortable one. This assumes home ownership and no debt.

Of course, exactly how much you’ll need for your retirement depends on how long you live. The average woman, who today might reasonably expect to live to 85, may need to fund at least 20 years of life after retiring.

There are plenty of online tools and calculators that can help you determine how much you’ll need based on the type of lifestyle you’re aiming for in retirement. AMP has a good retirement simulator available here

Map out a plan

Once you know how much you’ll need, and (for some) have recovered from the shock, the next step is to put together a plan to map out how you’ll get there.

You may already be on track – but if not, don’t despair. From today you can start to pump extra into super and do what it takes to bridge the gap.

This might include strategies like putting more into your superannuation via salary sacrificing, if that option is available to you – and consolidating funds to better control your strategy and save on fees, if you have more than one fund.

You also should check to see how you’ve got your superannuation invested – that is, are you invested conservatively, balanced or aggressively.

This indicates what proportion of your investment is allocated to assets that are high growth (for example, certain shares) and what proportion are lower return (for example, cash).

If you can’t remember what box you ticked when you signed up to your current super fund, give them a call and find out.

It’s vital to know this because you need to make sure that how you’re invested suits where you’re at in life.

If you’re twenty or more years from retirement you may be prepared to take the extra risk to be aggressively invested – but this is less likely if you’re within five years of retiring where more conservative investments may be more appropriate.

Seeing a financial planner at this stage can be useful in working out your plan and talking through what options are best suited to you and your unique situation.

The best advice I can give you is this: don’t leave this step on your ‘to-do’ list for months on end – it’s all too easy to let time pass and miss out on the building wealth. Every day counts.

Implement your plan and set a review date

Once you have a plan worked out, don’t leave it on the shelf gathering dust. Put it into action as soon as you can. Not only will you feel empowered by doing this, you’ll also be helping your money work harder straight away.

It’s also important to schedule a review date – mark that on your calendar and highlight it so you don’t forget. No plan can really serve you if it isn’t reviewed regularly.

Do your review every year – at a minimum – so you can see if you’re on still track or if you need to adjust the plan.

By taking control today you’re setting yourself up for a better future and a retirement which provides you with a potentially higher quality of life, one where you can afford to do the things you want to do rather than simply surviving week to week.

*Claire Esmond of Pave Wealth Services (WA) is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

** Includes maximum pension supplement and clean energy supplement. Rates current from 20 September 2013)

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