5 tips for self-employed women navigating the superannuation gap

As the CEO of Australia’s first superannuation fund for women, Verve Super, Christina Hobbs is painfully aware of the superannuation gap between men and women – particularly for those who also happen to be self-employed. In this article, she shares her tips on how to start rectifying the situation.

Being self employed can be liberating, but the idea of retiring can often hang above the head of a self-employed woman like a dark cloud.

As any small business owner knows, it’s not always easy finding the money and making the decision to contribute to super.

Self-employed women are particularly likely to struggle with retirement planning.

Australia’s superannuation system is linked to paid work, so it naturally disadvantages people who take significant time out of the paid workforce to care for family members or work flexibly (think: women).

The average Australian woman retires with around 47 percent of the super of the average man. For women aged in their 60s, the average super balance for wage and salary earners is $175,000 – double the average balance of $83,000 for women who run their own business.

READ: How much will I need to retire at 60?

According to Kate Carnell, the Small Business Ombuds(wo)man, as women business owners tend to juggle work and other family responsibilities including care, they are also more likely to retire with smaller, less financially rewarding businesses.

The system clearly needs to change if we’re to close the retirement savings gap.

The good news is that most working women can take steps to actively grow their super balance while they’re still working. There can also be some great tax advantages for contributing to super to boost retirement savings.

With my fellow co-founders, we established Verve Super as Australia’s first superannuation fund for women, with the specific mission of supporting women to build financial power to close the retirement savings gap.

Here are Verve’s five hot tips to power your retirement savings in 2019.


1. Know what you will need in retirement and make a plan


There are different ways to calculate how much you will need to save to live comfortably in retirement.

As a rough guide, the Association of Superannuation Funds of Australia (ASFA), estimates that single woman will need around $42,764 per year to live comfortably.

Once you have an idea of what you might need, check out how you’re tracking in the ASIC Money Smart Retirement Planner Calculator. This will give you an indication as to whether you are on track or need to take action to boost your retirement savings.

You can also access Verve’s free coaching video on ‘Supercharging you Super’ to learn more about how to understand your needs and set your plan.


2. Make the most of superannuation tax benefits


Contributing to super may also provide tax savings today.

If you’re self employed, you can claim an annual tax deduction for up to $25,000 in “concessional” (before-tax) super contributions. Concessional contributions are taxed at 15 percent within your fund. If this is less than your personal tax rate, adding to your super could be a very tax-friendly way to save for the future.

That said, if you are a low to middle income earner, claiming all your super contributions pre tax may result in you missing out on the Government’s co-contribution scheme.

It pays to have a good read of the ATO website and if you need further clarity, speak to your financial adviser. If you’re thinking about claiming a tax deduction for your contribution in a particular financial year, it needs to be made before 30 June.


3. Choose the right superfund for you and set up your contributions properly


Before you start making contributions, you need to choose a fund. This is an important decision and can have a significant impact on your retirement nest egg and the companies and industries your super is invested in.

Each fund offers different investment options, benefits and charges different fees. Funds also apply different ethics to how they invest, some funds apply no ethical screening while others screen out industries like: gambling; tobacco; armaments and weapons of war; animal testing and cruelty; fossil fuel projects and more.

If you can’t find information about the ethics of a fund upfront on their website, then they’re most likely not investing your money ethically.

It’s important that you notify your fund before claiming a tax deduction. You should be able to find all the information and the relevant form on your super funds website. Any good superfund will be able to support you to set up your contributions.


4. Manage cash flow through smaller, regular payments


The powers of compound interest mean that even small contributions to super can make a big impact over the long term.

As a self-employed woman, you may find it easier on cash flow to make small, recurring contributions.

An easy way to grow your super effortlessly may be to set up regular, automatic payments to your fund. All you have to do is decide on an amount you can comfortably contribute to your super on a regular basis.

READ: The trouble with SME owners and superannuation


5. Help change the unfair retirement savings system


Take a minute to visit the Parliament of Australia website and search for your local MP or Senator, look up their contact details and ask them what they’re doing to help close the retirement savings gap between men and women.

No matter who you are, improving the financial future of Australian women will provide benefits to all so it’s absolutely worth demanding change from our politicians.

 

The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced financial advisor as each individual’s circumstances will vary.

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