It’s a sad reality that many women will retire with significantly less superannuation than their male colleagues, but new research reveals by how much.
Roy Morgan Research found that women have an average super balance of $92,000 at retirement – that’s 40 percent less than the average male retiree, with $154,000.
Based on those figures, the average retiree – whether male or female – will be underfunded in retirement, according to super standards recommended by the Association of Superannuation Funds of Australia (ASFA).
ASFA says a single person would need $22,539 a year to fund a modest lifestyle in retirement, and $41,090 to fund a comfortable one.
“Yet to generate this $40,000 per annum in retirement for a comfortable lifestyle, most women will need to have around $500,000 in retirement savings (today’s dollars),” said Anne Myers, chief operating officer at ING Direct.
Why women are worse off
Firstly, she said, many women have a broken work pattern that reduces their ability to accumulate super, due to embarking on maternity leave, and for some, taking an extended period out of paid work to bring up children.
“Mothers who choose to return to work often seek part-time employment to balance the demands of raising a family, resulting in less savings accumulating in their superannuation fund,” Myers said.
A separate study conducted by Suncorp Life revealed that taking just two years out of the workforce to have children can leave women up to $50,000 worse off in retirement.
Ways to make up the baby deficit
Researchers at Suncorp Life found that to make up the “baby deficit”, women needed to make an additional 1 percent super contribution for every two years out of the workforce, for the rest of their working life.
You’ll also need to work out how you can survive with less money, said Michelle Hutchison, spokeswoman for RateCity.
“Start by finding out about government assistance. There are benefits and allowances to help with the costs of raising children,” she said.
“A major concern for most new parents is how they will manage the mortgage repayments when they drop from two incomes to one – even for a short period of time.”
Hutchison suggests seeking professional advice about switching from principle and interest repayments to interest only, to allow you some breathing room while your cash flow is reduced.
“But it should only be for a short period,” she said. “Treading water is not a good long-term strategy.”
A good way to prepare financially before baby arrives can be to pay a little extra in advance into your home loan directly or use an offset account as a kind of savings pool, she added.
“By adding just $100 extra to an average-sized home loan each month, you’ll build a tidy amount to redraw down the track. If you can afford to keep it up once both parents are again earning an income, it could help to shave tens of thousands of dollars off the loan.”