Women and retirement savings

I recently read an interesting article in the Sydney Morning Herald, about women and superannuation – our state mandated retirement policy. The law states that employers must contribute 9% of their employee’s salary into a superannuation fund, which cannot be touched until retirement. (Simply speaking of course – there are loopholes in every part of that previous sentence, but I’m trying to keep it simple!). With July 2013 clicking over, Australian’s will now get 9.25%, increasing slowly to 12% in 2019.

It’s a great system – but it’s not working in reality. And it’s not working the most for women. Naturally, women take time out of the workforce to have children, and this impacts their retirement balance. Women also live longer, which means they need even more than a man would.  The article outlines the details of the shortcomings most women will face, based on their research.  There is the capacity for individuals to add to their superannuation, up to a point (it’s got some preferential taxation laws, so it was being used by the super rich to save bucket loads of cash). In my first year of working in my career, I overheard older people talking about their super balances, and how much they should co-contribute to have enough in retirement. Of my own volition, I took this eavesdropping to heart, and decided that I wouldn’t miss $50 per week, and I’d add that (pre tax) to my super account.

What I find incredibly interesting in this issue is the discussions I have with people my age: almost everyone is against or ambivalent that someone their age would be doing this! Their feelings are either

  • I need the money more for other things (lifestyle, saving for a house, paying off a mortgage)
  • You never know what might happen to the balance (as it’s in the stock-market)
  • Retirement is so far away – if I have a huge property/shares portfolio, I’ll be fine

Evidently, I don’t buy into any of these arguments.

Reading the article that I linked, heartens me.  It heartens me most when I look at the graphic. (You can be disheartened, so you can be heartened right? Spell check disagrees?!)

source: smh.com.au

source: smh.com.au

I don’t like to be brash, or the tall poppy (something Australian’s avoid). But that decision in 2010 has meant I am ahead of where a 45-49 year old women is!  I’ll admit it’s not all my doing, my employer has been contributing above 9% for as long as I’ve worked here (4.5 years), and has risen to 15% today!  When I asked a colleague who started when I did, therefore had the same salary, his balance was $19k less than mine. Both of us have our entire balance in the high growth option.

It’s nice to feel safe to take some time off to have children! And I can heed the advice, which is ‘a man is not a plan’ (but a man sure is nice…)

I’m glad to see other bloggers at my age and stage are talking about retirement savings… even if my real life friends aren’t!

How do you feel about retirement savings?  Is it too risky to let a fund manage a huge amount of your money on the stock market?  Do you think you can do a better job?  Would you co-contribute?

16 thoughts on “Women and retirement savings

  1. This is something that is so important. I am in the 55 – 59 group (just) and have more than double the average for females of my age. I was 30 when the compulsory employer super became a reality. For a number of years that was all that went into my super but eventually DH nagging go the better of me and I started making contributions. It was difficult to see the value, especially when I needed to buy new school shoes etc for my daughters but I am now thankful that I did it.

    On the other side of the coin, it is also wise not to get sucked into the popular press articles that say you need $1M to retire etc. It depends very much on your current and proposed lifestyle. We plan to retire when the mortgage is paid off so last week I worked out that when I excluded the mortgage payments and our transport to work (substantial cost) from our combined net income that we lived on $39,000 last year. We live modestly in some respects but could tighten our belts a lot more if needs be. We run 2 cars, took a holiday, ate out, went to shows etc so are hardly destitute.

    • I realise the graph is a little skewed as super wasn’t compulsory in the lifetimes of some age groups. So to have ‘caught’ up is admirable, and you should pat yourself on the back for that! At 30, I’ll have had 12 years of compulsory super, and a chunk of that at the minimum employee contribution.

      I totally agree that magic numbers (like $1mil) aren’t really relative to the true living costs of every person. But it’s so much easier for you to know, given it’s closer, and the time cost of money won’t change as much. Whereas, I know I’ll ‘spend’ more in my active parenting years, than I perhaps do now, or will when I approach retirement.

      At the end of the day, I think it needs to be balanced – balanced between where you have ‘assets’ for retirement (ie the home as well as super funds/share, but also some cash, or bonds and other things I’ve never tried). But it’s also balancing ‘today’s costs’ like school shoes, against ‘future costs’ of retirement. I don’t miss the $50 a week (and consider up-ing it a little), but I’m still enjoying life, like you.

  2. I think these graphs will change dramatically in upcoming years because few men now have “lifetime jobs” – they change employers or retrain for new careers often. And women make up the majority of new professionals in fields like law and medicine. As a civil servant, if I keep my job to retirement age, I will get a good pension. Those who complain about government pensions don’t usually know how much we contribute – I pay over 10% of my net salary to the pension plan and it is soon increasing to almost 12%. Although I am healthy and expect to work to retirement age, I have savings as well, so that I would not be destitute if I had to leave my job before that. I do worry about how my savings are invested but there is no foolproof method (NOT investing means losing funds to inflation). I agree with Fairy’s comment – it is really all about your planned retirement lifestyle and expected expenses.

    • Government jobs, like yours and mine, seem to be ahead on retirement savings – I suppose it’s either now or a government pension later! And whilst I agree there are a lot less lifers, I work in a place of lifers!

      Investing is scary – the losses mainly. But not understanding it all or being able to predict outcomes confidently like you can set interest rates.

  3. Here in the US, I hear the stock market is manipulated by the government so I would tell anyone to make sure they don’t have all their eggs in the same basket. In my case, I would hate to have everything I worked to save instead of spending it now lost in another crash so I would take a lower risk than many. You are doing great with your investments and what you are comfortable with is what you should do.

    • Low risk options certainly exist and are favoured by those closer to retirement. As to the government’s role in the share market, if anything I’d think they try incredibly hard to keep it stable or growing, but there are things bigger than themselves. Super is definitely part of the picture combined with owning property. And cash savings. At this age some risk is easy to handle, with possible big gains but more than enough time to recover.

  4. It is really heartening to see a younger woman planning ahead so well! The great thing, too, is that your balance will continue compounding even during those years ‘out’ for child-raising (if you decide to have kids.)

    I go through suspicious phases with Super, so we have about half our current investments in Super. I don’t plan for Super to be our only source of retirement income. Our goal is a balance of private investments, property, Super and some passive income.

  5. This is one area where I am not doing very well – my super is around half of the average for females 18-24! I’m hoping to catch up once I start working fulltime. To be honest I hadn’t thought about making contributions, but seeing how much it adds up, I will think about doing it.

    • It’s certainly understandable with your PhD studies that your super might not match the average. As other commenters have said, it’s not a prefect besst but it’s an option. I thought I’d find it easier to contribute young, before mortgages and kids etc. So far, I’ve not missed it

  6. While I agree with everything you wrote I will never add anything into super unless I am almost 65. Why? Because I am sick of the government changing the rules on how and when you can access your super balance.
    I like being able to control my own money and use it as I please. If I could utilise the money similar to the 401K system in the US then I would be all for it, but the way super stands at the moment seems criminal. It is your money after all, so why shouldn’t you be able to do with it as you please? I understand it is to protect individuals from spending it all prior to retirement, but that impedes those of us that would rather make use of that money now.

    Despite not adding anything to my super, my account sits at a little over $150K (according to that infographic I am 5 times ahead of other people my age and almost have about as much as many 50 year olds have). For someone my age I feel that is fairly good. How did it get so high? I migrated to a self managed super fund and stopped paying 1% PA in fee’s. I actually made profitable investments (unlike the majority of funds over the last 5 years) and I monitor it on a weekly basis.

    Surely those of us that have demonstrated financial competency should be allowed to do whatever we like with our own money? Who says the government knows best? And who is Paul Keating to decide that my future should be tied up in superannuation? I couldn’t even vote at that point in time, and I sure as hell wouldn’t have voted for such a tightly controlled system if I could have. Australia – the land of the lowest common denominator… Just because the average Australian halfwit can’t manage money, we all suffer the consequences of superannuation.

    I know this isn’t really what your post is about, and I agree that women have it much tougher when amassing a retirement package, but I hate almost everything about superannuation and I needed to vent my frustrations.

    • Glen, your rant is more than welcome! In the first paragraph or two, I was thinking to suggest a SMSF to you, but it seems you’ve done that already and done incredibly well. If I’m honest, I’m not as learned in the stock market, and so as almost the lowest common denominator, accept the pitfalls of the mandatory super and the investment choices my fund offers. I think there’s two ways of looking at this – either, like you, annoyed that we’re not treated with great autonomy when we’ve proved ourselves, but the opposite is – those who sign up for super may be better off than if there wasn’t a compulsory system. The problem with any blanket system, as it never truly is ‘one size fits all’ and for that reason, it’s great that there’s self managed super funds now.

      I do agree with you that it’s hard to know what the government might do or regulate with super, and there’s been some tweaking of late, as people used loopholes to their advantage. I naively think that it’s in the govt (and the nation’s) best interest for the majority of people to be able to self fund their retirement, rather than rely on a pension, and I can only assume the policy makers are aiming for more or less the same thing with super funds.

  7. Well done, Sarah. Keep it up if you can. Life has a way of throwing curve balls and plans can change but if you start young and make regular payments, your super will grow.

    Some of those older women were affected by sexist govt policy, eg female teachers working for NSW govt who took maternity leave had two choices with the super scheme at the time (prior to compulsory super), leave or keep paying. Who could afford that while on maternity leave with no pay and with a young family? Hence, in teaching and other govt jobs, men dominate the first two valuable super schemes. And women have nothing.

    I only have compulsory super. I put most of my pay into the mortgage. My husband contributes extra to his better scheme which has a better post-retirement payment scheme. Once my mortgage is gone, I will be putting the same amount into super, a share portfolio and cash savings. Given the ridiculous Sydney property market, that will be quite a bit that will be saved.

    • Thanks Lucinda – I figure it’s a good solid start, even if I don’t continue, for whatever reason.

      I had no idea about the policy – certainly incredibly sexist! At least, to some extent, women and men can share super (in a marriage, or civil partnership?) I can therefore totally understand just keeping the bare minimum going to super, and putting other money elsewhere, such as a mortgage. If you retire with a healthy super balance, and no home, it will likely eat into the balance faster. Thanks for sharing your strategy – it’s something I’m sure I’ll need to adjust as I ‘grow up’!

  8. Really interesting to hear about all the sides to your mandated retirement fund. Seems like there are a lot of controversial pros and cons, but that happens with mostly everything. My employer does not offer a 401K. which is annoying, but if anything I am at least grateful because it is an opportunity for me to open my own retirement account and manage it. I might have ended up ignorant to the entire process if a 401K was simply provided.

    My goal is to open it by the end of the month and manage it myself. There’s hopefully not going to be much to manage as I plan on investing for the long haul. I’ve been reading up on IRA’s and what to invest in, so hopefully it goes well! It is awesome that you have saved up so much already, I really need to get on it!


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