Raising a family and your super balance7 Mar 2017
Women are still the primary caretaker in most Australian families; we take time out of the workforce for maternity leave and often take longer periods off (potentially working part-time) to raise children. But what effect is this having on our financial security down the track?
Taking time off work means you’re not receiving employer super contributions or you may return to work part-time and receive lower contributions than when you worked full-time. Over a few years, this can have quite a significant impact on your super.
In fact, having a family can create a ‘super baby debt’ for mothers of up to $50,000 by the time they reach retirement age* and Australian women retire with an average of $150,000 less than men.**
So what can you do to help reduce the ‘super baby debt’?
MAKE ADDITIONAL CONTRIBUTIONS
If you’re planning to start a family in the next few years, you may want to consider making additional contributions to boost your balance before you go on maternity leave.
You can either make concessional (before-tax) contributions as a salary sacrifice, or you can make regular or lump sum voluntary contributions from your after-tax income. Yearly contribution caps apply.
You’d be surprised the difference even $10 a week extra can make by the time you retire – check out our Contributions Calculator to see the difference for yourself.
And it’s a good idea to continue making additional contributions when you return to work. SuperGuru recommend women adopt the ‘one per cent rule’ – adding one per cent extra to your super contributions for the remainder of your working life.
GET YOUR PARTNER TO MAKE CONTRIBUTIONS FOR YOU
If you’re married or in a defacto relationship (including same-sex couples), and your partner makes contributions on your behalf, they may be eligible for a tax offset of up to $540 for the financial year.
Your partner will receive an 18% tax rebate on non-concessional (after-tax) contributions (up to $3000 per year) if your income is less than $10,800 per year, or a partial rebate if your income is between $10,800 and $13,800.
From 1 July 2017, the eligibility rules for the tax offset will change. The 18% offset up to $540 will apply if your income is up to $37,000 per year, with partial rebates available up to an income of $40,000 per year.
You may also want to consider ‘splitting’ some of your partner’s concessional (before-tax) super contributions to your account each year. You may be able to split up to 85% in a financial year (please note this still counts towards your partner’s annual contribution cap).
Depending on your income, you may be eligible for a government contribution.
If you earn less than $51,021# p.a. and make a voluntary contribution, you may be eligible for a government co-contribution of up to $500.
If you earn less than $37,000# p.a. you will be eligible for the Low Income Super Contribution. This contribution will match 15 per cent of concessional (before-tax) contributions, up to a maximum of $500. This contributions is automatically calculated by the ATO after you lodge your tax return.
This contribution will be replace by the Low Income Superannuation Tax Offset from 1 July 2017.
KNOW YOUR INVESTMENT OPTIONS
Most Media Super members are invested in our Balanced (MySuper) investment option. But everyone has different investment needs, so based on your stage of life, financial situation and how much risk you’re comfortable with, there may be investment options better suited to your needs.
Generally, when you’re younger, you may want to invest in growth options as you have a longer investment timeframe and usually can afford to take more risk. As you get older, you may gradually move to more conservative investments aimed at reducing volatility and preserving your balance.
Find out more about making the right investment choice for you.
TALK TO US – WE’RE HERE TO HELP
The best plan to help reduce the ‘super baby debt’ will be different for everyone.
If you have any questions about your super or want to talk through making additional contributions, spouse contributions, super splitting or your investment options, give our friendly Super Helpline team a call on 1800 640 886.
If you’re after more complex financial advice, the Helpline can organise for you to talk to a Media Super Financial Planner^.
Raising a family doesn’t mean you can’t continue to raise your super balance too. Take action now and help reduce the super gap.
# Applicable for the 2016-17 financial year.
^ Media Super has engaged Industry Fund Services (IFS) ABN 54 007 016 195 AFSL No 232514 to facilitate the provision of financial advice to members of Media Super. Advice is provided by one of our Financial Planners who are Representatives of IFS. Fees may apply. Further information about the cost of advice is set out in the relevant Financial Services Guide, a copy of which can be obtained by calling IFS on 1300 138 848. IFS is responsible for any personal advice given to you by its Representatives.