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In the latest hit to women striving to save for their retirement, the Australian Institute of Superannuation Trustees (AIST) has estimated that menopause costs women more than $17 billion per year in lost earnings and superannuation.
They base this on findings that women in the 45 to 54 age bracket retire on average at 52.1 years, which is much earlier than they planned (59) and earlier than men (59.5). And 44.9% say that “own sickness, injury or disability” is why they left their last job.
It doesn’t take Einstein to realise that forced early retirement hits single women harder than it hits women in a couple. Anyone retiring before Age Pension age (currently 66 and six months), and without savings or a spouse that might be able to help, could be forced to live on the disability pension or JobSeeker.
I hope not to join those statistics of women retiring early because they have to, and not because they want to, but I can’t escape the fact that I am in that age bracket and it could be a possibility.
Fortunately, because I have written about superannuation for the majority of my working life, I have known about ways to boost my retirement savings early. Salary sacrificing is a good example.
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 super 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.
In the 2016 census, women over 55 were the largest growing homeless cohort and think tank Per Capita estimates, if this trend continues, there will be over 15,000 homeless women over the age of 55 by the 2031 census.
The right stuff
Those statistics don’t have to be the reality for all of us. Whether you’re divorced, widowed or choose to be single, there are actions you can take to boost your balance early.
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 super balance, but she also believes strongly in the power of making extra contributions whenever possible.
You could set up a regular direct debit into your super account, but not everyone is that organised. And if you have irregular income, you may prefer to wait until later in the financial year to see how much cash you can spare.
You can make a personal contribution to super at any time during the financial year and claim a tax deduction when you do your personal income tax return after providing your super fund with a notification of intent to claim. This means you can review your personal situation towards the end of the financial year, check how much of your annual tax-deductible contributions cap is remaining and how much free cash you have available. You can then make a tax-deductible contribution instead of planning at the beginning of the financial year.
You can also ‘carry forward’ unused concessional contribution caps from previous years to boost your tax-deductible contributions. Check your MyGov account under ‘Super’ or contact your super fund to find out how much you could potentially contribute this way.
If you’ve used up your available tax-deductible contributions cap and still have cash to spare – perhaps due to an inheritance or other windfall – you can also make a non-concessional (after-tax) contribution of up to $110,000 or up to $330,000 using the ‘bring-forward’ rule. If that sounds like a pipe dream, those on lower incomes may be able to take advantage of the government’s co-contribution of up to $500.
And if all these different types of contributions have your head spinning, learn how to decide what contributions are best for you.
Downsizing is another way to turbocharge your super. If you are aged 60 or older and have lived in your home for at least 10 years, the downsizer contribution allows up to $300,000 of the proceeds of the sale of your home to be contributed to super (if your balance is under $1.6 million) without it counting towards contribution limits.
The slated reduction in the eligibility age from 60 to 55, which was a March 2022 election promise from both parties, makes this allowance even more attractive.
“It gives you more time for your super to accumulate and grow,” says Biti, who thinks it’s something she may well take advantage of in future.
Downsizing without the contribution
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 super balance is not huge. But she does own the house she lives in, because she had the foresight to sell a property in Stanwell Park south of Sydney and buy somewhere more affordable in the Blue Mountains a few years before she retired.
After eliminating mortgage debt, there was 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 to boost her super as much as possible, but also because she loves interesting work. Now retired, she relies mostly on the Age Pension but has very little debt, keeping herself out of income poverty.
“I like to embrace whatever life throws at you with enthusiasm, not regret what you’ve had to give up,” she says.
How you choose to invest your super savings can also boost your balance. For example, Biti has always invested aggressively – 100% in shares or other growth assets.
A 100% allocation to growth assets means there have been some nail-biting years, but Biti is prepared to stay the distance. She accepts that over time, despite some years of negative performance, 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 with 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, with closer to 50% growth assets, is just not aggressive enough, especially for younger people with time to ride out the market’s ups and downs.
No matter how you have ended up single, there’s a lot to be said for the financial freedom of flying 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 super and retirement planning decision with a partner. And I say Amen to that.
Read more about women and super in our three-part guide: