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I’ve known about salary sacrificing – its benefits, how to do it, when to do it – for almost the entire 20 years I’ve been writing about superannuation.
But it took me a good 10 years (possibly closer to 12) before I actually filled in the forms with my then employer and started having a small percentage – 3 to 5% – taken out of my before-tax pay and put straight into super. I haven’t done it continuously since then, but whenever I’ve felt I’ve had a few extra dollars in my pay packet, I have. So, what’s been the result?
Now I can see the benefits have been enormous. I have a superannuation balance that is more than twice the national average. This is despite one extended break from the workforce, and a late start into paid work due to overseas study and travels. I’m now reasonably confident that while I may not have a rich retirement, I will be able to have a reasonably comfortable one.
As a freelancer in an industry that’s not exactly growing, this provides enormous comfort for both myself and my small family. A career in superannuation reporting doesn’t make for great dinner party conversation, but it does mean I will be able to continue going to dinner parties into my retirement. Not because it’s paid me the big bucks but because it has given me the knowledge to be able to make my limited ‘bucks’ go further.
You’d be familiar with statistics highlighting the growing number of single women living in poverty. If not, read our latest report here: Women and super: How to beat the odds.
The right stuff
Those statistics don’t have to be the reality for all of us. Whether you’re divorced, widowed or just choose to be single, your superannuation balance doesn’t have to be pitiful.
Louise Biti is founder and director of Aged Care Steps, a consultancy that provides aged care support to financial advice professionals. She knows that being in a well-paying job has helped her superannuation balance, but she also believes strongly in the power of making excess contributions whenever possible.
Since 1 July 2017, you’ve also been able to make a personal contribution to superannuation for which you can claim a tax deduction if you provide your super fund with a notification of intent to claim. This means that you can review your personal situation at the end of a financial year – how much of your contribution’s caps might be remaining and how much free cash you might have – and make a donation then instead of planning at the beginning of the financial year.
“It’s so much easier than it used to be when you had to set it up at the beginning of the year,” Biti says.
But a healthy superannuation balance isn’t the only thing you need to prioritize for a poverty-free retirement. Owning your own home is key and Biti says she has prioritised paying off her mortgage before adding too much to superannuation.
“For me, a single person relying on myself, I wanted to pay off my house because that always gave me far greater security at every age,” she says.
Paying off your home and then downsizing is another way to turbo-charge your superannuation with the new downsizer contribution which allows up to $300,000 of the proceeds of the sale of a home to be contributed to super (if your balance is under $1.6 million).
Downsizing without the contribution
The downsize contribution is a strategy I expect I may use when the time comes but even before it was introduced, many single women have been taking advantage of selling up and moving somewhere more affordable to set themselves up for retirement.
Barbara Lepani is 73. After taking career breaks to have children, she was a working single parent in the 1980s. Due to a wide and varied career, including one more career break for a three-year Buddhist retreat, her superannuation balance is not that huge. But she does own the house she lives in, because she had the foresight to sell a property in Stanwell Park and buy somewhere more affordable in the Blue Mountains a few years before she retired.
There was also enough left over to make key renovations to ensure it was a house she could live in as she aged. She kept working into her 70s, in order to boost her superannuation as much as possible, but also because she loves interesting work. Now retired, she relies mostly on the pension but has no debts, keeping herself out of income poverty.
“I like to embrace whatever life throws at you with enthusiasm not regret for what you’ve had to give up,” she says.
How you choose to invest your superannuation funds can also boost your balance. For example, Biti has also always invested aggressively – 100% in shares or other growth assets.
An 100% allocation to growth assets means “there has been some years where it doesn’t look good,” but Biti is prepared to stay the distance, accepting that overtime, despite some years of negative performance, in the long-term shares outperform.
I’m not as aggressive as Biti and am in my industry fund’s balanced investment option. But due to the changing nature of investment option definitions, my balanced option is actually reasonably aggressive and 71% invested in growth assets.
“Don’t take the label for granted,” Biti says. “Because as funds have tried to compete, I think the labelling of them has changed.”
She says the traditional balanced option – which would have had around 30% growth assets – is just not aggressive enough.
Whatever means you find yourself single by, there’s a lot to be said for the financial freedom of flying your superannuation solo.
Sure, there is only the one income to rely on, which can be particularly stressful if you are still supporting a growing family, but you also don’t have to negotiate every single super decision with a partner. And I say ‘Amen’ to that.