We hear a lot about the gender pay gap… and we know that women tend to retire with far less in their superannuation accounts when compared to men.
We also know that women typically live longer. Taking all these points into consideration, there can be cause for concern when women look at the stability and longevity of their financial future.
Secure your retirement
Here at First Financial, we have many female clients who are building their wealth and securing their retirement both on their own or with a partner. We believe that with some learned knowledge, professional guidance and a conscientious attitude, women can create a strong, secure financial position for themselves.
Whether single by choice or through divorce or bereavement, it’s important to be in control of your money. And by implementing various strategies, it can become easier to manage finances and build a firm foundation for the years to come.
Learning to budget and save
Regardless of your age, the first step to financial independence is to increase your financial literacy. Understanding how to budget, living within your means and not overspending create the framework and skills that were perhaps once believed to traditionally be a man’s responsibility.
Once you have these skills, your ability to start saving is the natural progression. Stefanie Costa, Financial Adviser, discusses some of the challenges faced by our clients.
“We have many female clients in different stages of their financial journey… some in their wealth building years, some closer to retirement and some in pension stage.
With women in the pension phase, they may have been somewhat reliant on their spouse for their financial position. And if their spouse has passed away, they now have to learn how to do everything on their own.
For them there is a lot of education… building their trust and helping them believe that they can do it on their own. We work closely with them, taking them step by step through everything. They might have to learn from scratch… sometimes they don’t know how to access their bank accounts or may have never paid a bill. It’s often a big learning curve!
On the other end of the spectrum, we have quite a few female clients who are very independent and have grown up looking after their own finances. They are now in the next phase of their lives where they are starting to think about the future… their retirement… and are starting to plan for those years, knowing that eventually they will have to rely solely on themselves for their next phase.”
Additional super contributions before and after children
As we mentioned earlier, women typically retire with lower superannuation balances. This is often a result of taking time out from full-time employment to have children.
A few years of little to no contributions can dramatically impact a superannuation balance at retirement. But making additional contributions before you have a child and again once you are back in the workforce can help make up for some of the gap. Even if the extra contributions are only small, over time they can have a significant impact due to the power of compounding interest.
If you currently have a spouse and earn less than $40,000 per year, it’s worthwhile considering spousal contributions. Your partner can claim an 18% tax offset on contributions up to $3,000, which equates to $540 annually. Another strategy to consider is super splitting.
Your partner can split some of their regular employer contributions to your super account at the end of the financial year. Both of these options can help reduce the long-term impact of your time out of work.
Consolidating and investing
If you have had multiple jobs through your career it’s quite possible that you have more than one superannuation account. We highly recommend searching for unclaimed funds. Consolidating these into a single account can help improve your return by minimising fees and ensuring you’re not paying premiums for insurance cover across different accounts.
It is also worth reviewing the various funds available in the market to make sure your super is with the best fund for you. Speaking with a financial adviser can certainly help you gain clarity over the wide range of options. An adviser will also be able to help you assess whether you have too little or too much insurance, to make sure you’re adequately protected should you be unable to work due to injury or illness.
Besides superannuation, you can also support your financial future through investing. If you have some savings it could be worthwhile engaging the services of an adviser to help you develop an investment portfolio. Stefanie talks about how many clients are now coming to her with a clear vision.
“There has been quite a shift and we are now seeing women who are very financially savvy… and to be honest many of the women save a bit better than the men! They are preparing for their future and they aren’t as frivolous with their money… they are good at planning… they have relied on themselves up to this point and whether they meet a partner or not, they understand the need to continue doing that into the future. They have great foundations for savings, they’ve paid down their mortgages and they are making sure that they are financially secure going into the next phase.
Our involvement in these cases is to help them to develop a suitable plan… setting them on their path and making sure they stick to it. We encourage them not to lose sight of their main goal.
In the initial stages there are a lot of questions while we develop a strong level of trust. Understandably, they want to know as much as possible, but as the relationship builds and we’ve been working together for a while, the need for all the nitty gritty information dissipates… they know we’ve got their best interests at heart, they are working towards their goals so the need for the finer details lessens.”
Never too late to take control
No matter what stage of life you are in, it’s important to feel confident that you have some control over what lies before you. Whether you have been flying solo for many years, or newly on your own, we urge you to take the time to review your situation and put a plan into action.
Your future you will thank you for taking control and creating a comfortable, worry-free retirement.