Women and super (Part 2): Strategies to boost your super in the lead up to retirement

On this page

1. Boost your contributions
2. Consider a transition-to-retirement strategy
3. Get your share in the event of divorce or separation
4. Leverage your spouse or partner
5. Check the quality of your super fund
6. Run your numbers
7. Consider working longer

Welcome to the second article in our three-part series on women and super. This article focuses on issues and strategies for women who are approaching retirement.

When retirement beckons, we often have fewer financial obligations getting in the way of saving. Perhaps the mortgage has been reduced or eliminated, and the days of paying school fees have passed. You may also be enjoying your highest earnings years. Even if you’re not feeling flush, there are steps you can take to secure your future.

We know that women tend to retire with lower super balances than men and are expected to live longer on average, a double whammy that can lead to disappointing retirement income.

View our webinar on women’s super and how to close the gap.

These tips can help women in their 50s and 60s make the most of opportunities to close the gap.

1. Boost your contributions

If you’ve got some spare cashflow, now is a great time to give your super a kickstart prior to retiring.

Concessional contributions (made via a salary-sacrifice arrangement with your employer or by claiming a tax deduction for personal contributions you’ve made from your bank account) not only boost your super balance but can also save you income tax.

Learn more about salary sacrifice and tax-deductible contributions.

The usual cap for concessional contributions is $27,500 this financial year, but if your total super balance was below $500,000 on 30 June you may have unused cap space from prior years that allows you to contribute more.

Case study: Tam

Tam is 57 and has just finished paying off her mortgage. She has a salary of $135,000 and wants to take the opportunity to maximise her super now that she’s debt-free.

Tam has never made voluntary super contributions before, and after logging in to myGov she discovers she has $60,000 of unused concessional contributions cap space from prior years. This is the gap between what her employer contributed for her and the annual concessional cap.

To take advantage of this, Tam plans to contribute enough by salary sacrifice this year and in the coming two years to exceed the usual contribution cap by $20,000. After three years, the unused cap space will be used up.

In 2023–24 this means she will salary sacrifice $32,650. When combined with her employer’s super guarantee contribution, her total concessional contribution for the year will be $47,500 – $20,000 more than the standard cap.

This salary sacrifice will be taxed at 15% on entry to the super fund, instead of Tam’s usual income tax rates, reducing her total tax by approximately $6,400 this year. This means $6,400 extra in super compared with if the salary was taken as cash.

So long as Tam’s total super balance stays below $500,000 on each 30 June, she can keep using this strategy in the next two years as she has planned, giving her super a hefty boost.

If you don’t have space under the cap to make more concessional contributions, or your taxable income is too low for them to be tax effective, you can also consider making non-concessional contributions.

Non-concessional contributions are personal contributions from your savings that you don’t claim a tax deduction for. The general cap for this contribution type is currently $110,000, but many people can contribute more using the bring-forward rule.

Non-concessional contributions can be an excellent way to move savings you have accumulated outside super into the tax-advantaged super environment, and later use them to provide convenient retirement income.

2. Consider a transition-to-retirement strategy

A transition-to-retirement (TTR) pension allows you to begin drawing income from your super while you are still working. The maximum that can be withdrawn is 10% of the pension’s balance each financial year.

When you’re over 60 this income is tax free (unless you’re in a rare untaxed super fund).

A common strategy is to use this tax-free income to increase the amount you can afford to contribute to super via concessional contributions while still meeting your living expenses. If you can also carry forward unused concessional contribution cap from prior years, this strategy can be even more powerful.

Case study: Diya

Diya, age 60, has a salary of $80,000 in 2023–24. She doesn’t feel she can afford to make any voluntary super contributions.

Diya’s financial adviser suggests she start a TTR pension using $250,000 from her super. By doing this, she can withdraw up to $25,000 in tax-free income in 2023–24.

This extra income means Diya can salary sacrifice $38,000 in 2023–24 and maintain the same after-tax salary. Contribution tax of $5,700 will be deducted, leaving $32,300 to be credited to her super account. The effect is $7,300 more going into Diya’s super than she is withdrawing – with no impact on her hip pocket at all.

Combined with her employer’s contribution of $8,800, Diya’s total annual concessional contributions will be $46,800 this financial year – over the usual $27,500 cap by $19,300. However, Diya has plenty of unused cap space from the five prior years – a total of $90,000 – so she is not in danger of exceeding the contribution cap.

Learn more about transition to retirement.

A divorce or separation later in your working life can put a real dent in retirement plans. You were planning as a couple and now need to make it alone. This is likely to increase the retirement income you need because you’re not sharing costs with another person.

Separating can be an emotionally difficult time and involve personal conflict but it is critical to get your financial affairs in order. Ideally, you don’t want to compromise on your financial settlement just to keep the peace.

Make sure you have experienced legal representation and don’t overlook super during negotiations – it is likely to be among the largest assets you shared. If you were married or in a de-facto relationship, super can be split after permanent separation or divorce.

Good to know

Until recently, super splitting was not available to separating de-facto couples in Western Australia.

Changes to the law that became effective in September 2022 removed this inequity, and de-facto super splitting is now available in all Australian States and Territories.

Learn more about the process of splitting super after separation or divorce.

4. Leverage your spouse or partner

For couples, the super system permits you to contribute (after tax) to each other’s accounts and to transfer concessional contributions made to one person’s account into their partner’s.

This can be of benefit if your super balance is lagging that of your spouse.

If you earn less than $37,000 in a financial year, your spouse can receive a tax offset of $540 in return for contributing $3,000 to your account. When you earn between $37,000 and $40,000 a lower tax offset is available. You don’t need to be employed to take advantage of this scheme.

In addition, spouse contribution splitting allows one spouse to transfer concessional contributions made into their super in the previous financial year into their partner’s account. This can be a valuable tool, not only to redistribute your balances in the interest of fairness, but also to ensure you both make the most of the transfer balance cap on super transferred into a super pension account or the pending introduction of additional tax on balances above $3 million.

Learn more about boosting your spouse’s super.

Case study: David and Elif

David and Elif are both 55. Elif migrated to Australia in her 40s and has not accumulated much in super in the subsequent years.

David contributes the maximum concessional amount to his super each year and their financial adviser has explained that he is likely to exceed the transfer balance cap at retirement. This cap limits the amount that can be used to invest in tax-free retirement income streams.

The adviser suggests David transfer the maximum amount permitted to Elif’s super every year using spouse contribution splitting. This should keep both his and Elif’s final balances under the cap and maximise the combined amount they can transfer into the tax-free retirement phase.

5. Check the quality of your super fund

The last thing you need in the lead up to retirement is to be exposed to a less than stellar super fund. Make sure your fund’s fees are reasonable and its performance stacks up.

A quick and easy way to check is to look at APRA’s Heatmaps. These are available for both MySuper and choice investment options and cover 77% of Australia’s super products in the accumulation phase. Search for your super fund in the ‘RSE name’ box and check the results for fees and returns. Lighter colours indicate good results and darker colours indicate poor results. If your option is all white, you’re probably in a great place. If it’s red and yellow – it could be time to look elsewhere.

Get more help with comparing and choosing super funds.

Now is also a great time to start asking your fund about how they help members with the retirement journey. What advice services are available? Are their pension products competitive? Do they have a product that is guaranteed to provide retirement income for life?

6. Run your numbers

It’s impossible to plan effectively and prepare for retirement without knowing what path you’re on. Putting your current situation into a retirement calculator is a good starting point.

The results may set your mind at ease that you’re on track for comfort or let you know that you’ll need to make some changes if you want to meet your retirement goals. Remember the output is not a guarantee, just an illustration of what is likely.

ASIC’s Moneysmart website has a simple calculator – and you can learn more about how to use it with our guide.

Your super fund may also provide calculation tools. The best calculators build in uncertainty in investment returns so you can see how this variability could affect your outcome.

7. Consider working longer

According to the Australian Institute of Health and Welfare, an Australian woman aged 65 in 2015 could expect nearly 17 more years of healthy life (and a further 5.5 years in less than full health). That’s a long healthy retirement to finance.

Working longer, perhaps part time or casually, reduces demands on the retirement savings you have accumulated and could give you time to save more.

There are no restrictions on accessing your accumulated super once you leave a job after age 60, or once you turn 65 even if you’re still working, so income from super and work can go hand in hand.

You can also receive Age Pension while working, so long as your income and assets are below the relevant limits. In fact, Age Pensioners are encouraged to work by the work bonus which disregards some employment income when calculating Age Pension entitlements.

Learn more about how working longer could improve your retirement outcomes.

For more on closing the gap, see Part 1 and Part 3 of this series: