WHAT CAN WOMEN DO TO IMPROVE THEIR SUPER IN RETIREMENT?
Most women realise that they won’t have as much superannuation as men when they retire, regardless of their marital status and whether they have children or not. Statistics released by the Australian Government in 2018 declared that on average, women have nearly 40% less super than men at retirement, although the gap has narrowed slightly in the past year.
When you add that to the fact that on average, women tend to live longer than men, it makes a woman’s financial situation in retirement, quite precarious. Maybe you have seen in the news recently that an increasing number of older women are finding it difficult to manage financially, and in fact, many are becoming homeless? Why is this happening?
Why do women have less superannuation than men?
Whether or not you live well in retirement, generally comes down to how much superannuation you have in your account. If you need to rely solely on the retirement pension, then even if you own your home outright, your lifestyle will still begin to suffer - because the pension isn’t a large amount of money.
This leaves you will using your super as a backstop to supplement the pension and if you rent, then you will be in an even more difficult position. The problem is that women who take maternity leave don’t accrue as much super as men, and when they return to work part-time, they once again lose out on employee super contributions (because they earn less part-time).
The fact that many women are not paid as much as men in a similar career only adds to the issue. The result being, that women have less super than men when they retire.
How can women make up this loss in super?
The best solution is to pay additional voluntary contributions every week, as early as possible. For example, if you pay an extra $50 into your super every week, this can make up for the loss if you return to work part-time after starting a family. If you don’t start a family, then these extra payments will add up to a nice payout when you retire.
If you don’t return to work after having a baby or return only part-time, your super will suffer from lower contributions for many years (until you work full-time again), but at this point you may be able to take advantage of the low income super contributions (currently $500 if you earn $37,000 or less a year). Also, if your spouse decides to pay into your fund as well as their own, then he or she will receive tax off-sets.
Of course, as far as your super is concerned, returning to work early and working full-time is the ideal course of action, but this isn’t an option for many mums.
Also, remember that if you divorce, you may be entitled to some of your spouse’s super as it’s considered a shared asset of the marriage. In this instance, you need to obtain legal advice, because you will likely need all the super you can get when you retire. Don’t just leave it to a handshake with your ex, instead take it to court and ensure that your financial future is secured.
If you are concerned that your super won’t be enough when you retire, even if you are in your 20s, 30s, 40s or 50s right now, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.
WHAT DOES THE 2019 FEDERAL BUDGET MEAN FOR YOUR SUPERANNUATION & RETIREMENT?
Despite the release of the latest Federal Budget in early April, it’s fair to say that unless the Coalition remains in power, none of Josh Frydenberg’s budget promises may come to fruition. This is because the new government will likely write their own budget.
Nevertheless, it’s worth taking a look at the 2019 Federal budget, because if the Coalition remains in government after May’s election, many people could benefit from Frydenberg’s proposals.
Specifically, changes to personal income tax and superannuation may help you to better manage your finances both today and in retirement.
Personal income tax changes
Australians have waited a long time for some positive changes to their personal income tax rates and with the expected budget surplus in 2019-20, Frydenberg has finally delivered some potential relief.
Tax relief was also the focus of the 2018 Federal budget where the government set in place a plan that would provide significant relief to low and middle income workers. Aimed at both raising and simplifying the tax brackets, the first stage of the government’s plan was to give workers earning $125,333 or less per year a tax offset when then submit their tax returns for the current financial year (2018/19).
This tax offset will be graded according to how much you actually earn with the maximum offset being given to those earning between $48,001 and $90,000 per year. In Frydenberg’s 2019 budget, these tax offsets will be increased, however the maximum offset will still be received by the $48,001 and $90,000 earners.
As an example, if you are in the middle tax bracket ($48,001 and $90,000) you should receive the full tax offset of $1080 when you submit your tax return this year.
Unfortunately, we will have to wait until 2022 to see the 19% tax bracket increase from $41,000 to $45,000 and in 2024, the 32.5% tax rate will be lowered to 30% for workers earning between $45,001 and $200,000. This means that you will have much more money in your pay packet, depending on your annual income.
It also means however, that this may only happen if the government doesn’t change in May, following the election.
Changes to superannuation are mainly focused on helping Aussies close to retirement top up their voluntary super contributions. So in 2020, if you are 65 or 66 years of age, you can make voluntary payments to your super without meeting the Work Test requirements (at least 40 hours work in 30 consecutive days). You will also be able to top up your super by paying three years of non-concessionary contributions in a single year, but that stops you from making any more after tax contributions in the next following years.
Frydenberg has also proposed that the age limit to receive super contributions by your spouse will be increased from 69 to 74 years of age.
If you need help sorting through how these changes will affect your super and retirement, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.
MONEY DOESN'T BUY YOU HAPPINESS - OR DOES IT?
Most of us wouldn’t turn a lotto win away, because after all, we can all do with more money! Whether more money makes us happy however, is a contentious issue, but it’s likely to depend on our definition of happiness.
If you want the world to be a perfect place and everything to go your way, then more money won’t turn your life into a nirvana, but if you want a life free of financial worries, then more money can certainly achieve your goals.
Defining what makes you happy
The issue of happiness and how it is defined was at the core of a recent study by Australian Unity. Their 2015 report – What Makes Us Happy? – revealed that happiness depends on three factors: a sense of purpose, good relationships and how much control you have over your finances.
Immediately, you can see that your financial situation is only one part of how you measure your happiness, so unless you have a sense of purpose and great relationships, even winning the lotto won’t make you totally happy!
Clearly, relationships and a sense of purpose are questions for another time, what I want to deal with here, is how you can help yourself to feel better about your finances. After all, if you feel more secure financially, then that can reduce any pressure on your intimate relationships and help you to discover a sense of purpose.
How much money do you need to feel happier?
When you look at the Australian Unity Report, you can see that the less money you have, the happier you become when you get more! For example, if you change jobs and your income increases from $40,000 to $55,000 per year, your level of happiness increases.
The amount of money that makes you happy is all relative however, because, as you can imagine, someone earning $200,000 a year won’t be hugely impressed with a $15,000 a year pay rise. In other words, their level of happiness won’t be increased as much as the person earning $55,000 - they will need a bigger pay rise to make them feel happier.
This example clearly indicates that it’s not the amount of money that makes you happy, it’s how it makes you feel. So if you can feel more in control of your finances, it should make you feel happier!
How can you feel more financially secure?
Whatever your current financial situation, feeling more in control of your finances will make you happier. Paying bills on time and having a pot of emergency money to hand are two ways that you can improve your financial wellbeing, and the key to financial security is to learn how to budget.
Initiating a savings plan and not borrowing money for your living expenses are both important steps that will keep you in control on a daily basis. After all, the more money you borrow for items that are not assets, the more money you fritter away and the less happier you become. To be happy with your finances, you need to be in control!
If you need help organising your financial future, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF A BUY NOW, PAY LATER SERVICE?
Buy Now Pay Later services have been heavily advertised in both the media and retail stores, but how good are they and should you make use of them?
What are Buy Now Pay Later services?
These are financial services that let you buy a product today, but delay payment to a later date. Over the past five years, their popularity has grown significantly and include Afterpay, zipPay, Oxipay and Openpay.
These services are offered at the point of sale in many retail stores, as well as being an option for online shoppers. You will need to provide your credit card or bank account details so that payments can be automatically deducted and you may be required to pay an initial deposit on the purchase.
What are the advantages of a Buy Now Pay Later service?
The first advantage of these services is that you can take home your purchases and pay them off over a period of time. You can quickly set up one of these accounts and use it straight away, compared with the time it takes to apply for other forms of credit.
As with credit cards and debit cards, Buy Now Pay Later services are fully integrated with a store’s checkout systems, so it is just as easy to use this service, as your EFTPOS card. As long as you make your repayments on time, there are no fees or interest to pay, and the payments are automatically deducted from your nominated account.
What are the disadvantages of a Buy Now Pay Later service?
As mentioned above, the initial advantage of these services is that they allow you to defer payments, but so do credit cards. The biggest difference between a Buy Now Pay Later service and a credit card is that credit cards are regulated under the National Credit Act and providers are required to comply with this Act.
Buy Now Pay Later services who are not covered by this Act, don’t need to enquire about your financial situation to ensure that you can afford the repayments. You might consider this an advantage, but in reality, borrowing more than you can afford to comfortably repay is a distinct disadvantage of Buy Now Pay Later services.
Also, since most credit cards charge interest on purchases, an interest free service, such as Afterpay, can be very seductive. Clearly an interest free option is a good financial move, but not if it encourages you to make impulse purchases that you can’t afford.
If you don’t have enough money in your account to make a payment when it is due, you will incur a late fee, which for Afterpay is $10 with another $7 if you don’t make the payment within another seven days. If you have used the Buy Now Pay Later service to purchase items that you really can’t afford, these late payments can quickly add up and might even total more than the actual cost of the item!
If you already struggle to control your finances, then these Buy Now Pay Later services are not the best option for you. For help organising your finances, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.
DO YOU UNDERSTAND YOUR SUPER STATEMENTS?
Just about all Australians have a Super Fund, but not many of us pay it too much attention. It’s fair to say that when the Super statement arrives in the mail, far too many of us don’t bother reading it and if we do, we really don’t understand what it’s telling us. It’s just a jumble of numbers, which is hard to interpret.
It doesn’t matter how old you are, everyone needs to understand their Super statements, because if you don’t, you might be paying more in fees than in money earned. Your fund might also not be the best for your situation, but you won’t know unless you can understand your statements.
So if you have problems understanding your Super statement, here is a short overview of what you need to pay attention to when it arrives in the mail.
Make sure your personal details are correct
To avoid unclaimed super, always check that your name and address are correct on every statement. With more than $17.5 billion in lost super across Australia, making sure that your contact details and your tax file number are all correct is the best way to ensure that you don’t loose track of your super when you change jobs or move to a new house.
Did you make any personal contributions?
These are the contributions you can make to your super above those paid by your employer. If you do make these contributions, make sure that they are all tallied and if any are missing, contact your super fund to find out why. The wrong tax file number is one reason why your voluntary contributions may become lost, but there are other reasons, so it’s always best to check that they are all correct.
Check your employer’s contributions
You might be surprised to learn that not all employers pay the correct amount of super into their employees funds, some don’t actually pay any contributions at all. Trying to make your employer pay your super, if they have been remiss, involves contacting the ATO and can be an uphill battle if you have already left their employment. So always check that your employer has made the correct contributions and if not, follow it up immediately.
Check your super fees
If your super fund charges high fees for administering and investing your contributions, and depending on how well the fund invests your money, you may see very little in the way of positive returns. This is why you need to keep an eye on the fees that your fund charges to your account and whether or not your returns are worth these fees. As a general rule, you want their fees to be the lowest possible, whilst still providing a good return on your investment.
Check your final balance
You want your money in a super fund that actually increases your balance at a decent rate, but that can depend on many factors. Your first step is to make sure that your balance is increasing over time and not being eaten away by high fees and poor management. Also check that you are not being charged premiums for life insurance that you don’t need.
If you are concerned that your superfund is underperforming, it might be time to look at other options for your super. If you want help managing your superannuation, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.