By AMP financial adviser Dianne Charman
With life expectancy continuing to rise, the reality is that today we need to make our earnings from 40 to 50 years in the workforce, extend across 80 to 90 years of living. Sadly, for too many Australian women, this isn’t happening. As a result, many may find themselves short of cash in their retirement years.
But it’s not just about ‘getting by’ in retirement. It’s also about retiring with a lifestyle that we aspire to and deserve, and that’s where the bigger issues lie. New research from AMP has revealed a huge disconnect between how much Australian women believe they need for a happy retirement and what they actually require.
According to AMP’s Super Shortage research, for the average Australian woman to live the retirement lifestyle they aspire to from 65, her savings will barely last a year. With the average life expectancy of Australians being 82.5 years old, this creates a super shortage of 14.1 years.
The findings are worrying as they reveal a big gap between expectation and reality, and suggest many women arecurrently saving much less than what they need to live out their expected lifestyle in retirement. For many, this will mean facing the prospect of having to push out their retirement plans by as much as 14 years.
How to shrink your Super Shortage?
It’s important to think about your retirement goals and whether your super contributions will fund the retirement you want. Planning as early as possible will go a long way towards bridging the super shortage between the retirement you want and the one facing you.
Get to know your finances better
Knowledge is power, so it’s essential to understand what, if any Super Shortage you have to be able to proactively plan for the future. There are lots of great tools out there to help, such as AMP’s retirement simulator which can help you work out what your annual retirement income might be, how long your money may last and what you can do to maintain your lifestyle when you retire. For Australians, this insight provides a useful tool to help meet their financial goals in retirement.
Using salary sacrifice to plough some of your before-tax annual income into superannuation if you’re under 65 can be useful as well. Even if you’re over 65, you can make either before-tax or after-tax voluntary superannuation contributions up to the age of 74 whilst meeting the work test.
The obvious benefit to salary sacrifice is that it adds to your super balance, but it can also be an effective way to reduce your overall taxable income. There are limits and a lot of rules on salary sacrifice, so it is important to seek financial advice before jumping into anything.
Pay attention to employee benefits where you work or at a company you’re considering taking a job at. With increased awareness in Australia around the disparity between men and women’s super savings, more and more companies are offering superannuation payments to employees taking both paid and unpaid parental leave. This is definitely a step in the right direction as it creates an opportunity for women to boost their savings by choosing to work for a more progressive company.
Ensure your personal information is up to date
Making changes to personal information on superannuation accounts is one of the many things new parents and in particular women face when they change their work schedule to raise a family. It’s a tedious task but taking the time to make simple changes can have a massive impact on savings when it comes to fees.
*Dianne Charman, of Jade Financial Group, 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.