This week I wanted to share my answer to an “Ask Tash” question that was raised by one of the members of our Women with Cents community:
“My husband thinks that putting our money into super isn’t worth it. What’s your opinion?”
Well, I can tell you that your husband is certainly not alone. The vast majority of Australians make the very common mistake of not considering super as their own money. But not paying attention to your super account isn’t a very wise decision for your financial future – and here’s why.
How much do we need to retire?
Today, most Aussies don’t have enough super to retire on, they rely on Government funded pensions. But pensions are being reduced and the restrictions on who is eligible are getting tighter. Plus, medical advancements mean we’re living longer lives than our parents did. So how much money will we need to retire? Here are some interesting stats:
That shortfall adds up to about $20-$30k per year!
According to ASFA this equates to needing approximately a $545,000 super balance at retirement for singles and $640,000 for couples (assuming a partial Age Pension). However, the ABS reported that the average super balances at retirement in 2011-12 were $105,000 for women and $197,000 for men.
That’s a pretty big gap, right?
Why paying more into your super now can pay off later
Making additional contributions to your super is an excellent way to increase your balance over time (bearing in mind the contributions caps). The sooner you can start making additional contributions the longer the money is invested for – giving you the opportunity to experience the benefits of compounding!
The tax benefits of investing through super
Investing through super can also be a very tax effective way to save for retirement, as your investments in super are taxed at 15%, while currently anything held outside of super once you earn over $18,200 a year is taxed at 19% and up, plus 2% Medicare levy.
But always seek advice first…
Having said all that, your goals, risk profile and time to retirement are important too. Once your money is in super you can’t touch it until you reach retirement age, so that is an important factor to consider.
If you need help weighing up the pros and cons, a financial planner and our Women with Cents community can help.
Submit a Question!
Have a finance question you’d like answered? Why not drop me a line! Each week I would love to answer a question from the community. Click below to get in touch.
The information provided by Women with Cents is general in nature. It doesn’t take into account your objectives, personal financial situation or needs. Think of it as educational material in which to help you make more-informed decisions. We recommend you obtain financial, tax and credit advice specific to your situation before making any investments or financial decisions.
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