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This podcast is for education and entertainment purposes. It's not financial advice and doesn't take into account your objectives, financial situation or needs. You should consider if the information in this podcast is appropriate for you and contact a professional financial adviser. If you are seeking financial advice, hello and welcome to episode seven of Women's Financial Empowerment, a podcast series from Teachers Mutual Bank, where we help women overcome some of the challenges they face in their journey to financial freedom.
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But before we get started, we'd like to acknowledge the traditional custodians of the country throughout Australia and their connections to land, sea and community. We pay our respects to their elders, past, present and extend that respect to all Aboriginal and Torres Strait Islander peoples. I'm your host, Nicole Banks, and today's episode is about how to make superannuation work for you as a woman.
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So we have spoken about this in other episodes, but now we're going to get into the nitty gritty. So I'm joined by the fabulous Betsy Westcott, my co-host of the series. Hi, Betsy. Betty's greatest wish is that every Australian enjoys financial well-being. She believes the more knowledge we have around money, the better choices we can make to live a happy, independent life.
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And Betsy has dedicated her career to helping people make the most out of their money. She holds qualifications in financial advice, home lending and money coaching. Betsy Welcome back. Nicole It's always great to be here. These have been fabulous conversations so far and we have touched on superannuation a few times in our podcast series, so I'm keen to get a little bit more detail today.
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So it's not something that we think about every day. Superannuation isn't something that we talk about every day, but it's really important to our financial wellbeing. So right across our working lives in Australia, percentage of our pay is invested in a superannuation fund. So they will have a nest egg essentially, and ideally it'll pay for our retirement. So in this episode we'll cover things like the basics, explaining the basics about super.
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We'll discuss why it's important in a bit more detail than we have previously, but we'll also explore the challenges for women in building a good super balance. And we want to look at those challenges and different ways to overcome them in a bit more detail. Australia's super system is admired throughout the world and it has a message about 3.5 trillion in retirement savings, which is quite an impressive number, but we're still finding it's not quite enough for our retirement, right?
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So how can our superannuation system, which wasn't really designed for women in mind, support women? So true. I often say that the super wasn't designed for women and actually it really wasn't superannuation. When they were drafting up and designing, it was actually based on the assumption of a middle level male executive of who worked a 40 year uninterrupted career and just, you know, calmly and progressively moved up the income and seniority ladder and that's not what most women's career look like, but in fact what most people's career looks like.
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So this is why we can sort of experiences and less than desirable results when it comes to super. So women are typically paid less from the age of 35. WGA has shown that they're more likely to work part time or casually than men, and they're more likely to be the primary carers for family members, all of which can hurt your super balance.
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So women between 60 and 64 are currently retiring with about 23% less in their super savings than men, according to figures from the Association of Superannuation Funds of Australia. Which is problematic because we have less money and we live longer and so we have to make that money stretch out further. there are those unflattering stats again, Betsy.
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So please tell me, do you have some good news about women in super? Yes, there is good news, thank goodness. And the good news is that by taking just a little bit more notice of what's going on in your super fund, you can literally make a huge difference to the final balance that you retire with. So you're going to share some of these helpful tips.
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In this episode, we're going to talk about why super is so important and the particular challenges for women in building a good super balance. And of course, the most important thing, some ways of overcoming those challenges. And with that, I'm going to hand over to you as always, Betsy. Thanks, Nicole. Now, everyone over the age of 18 who earns a wage should be getting super, whether you're in full time work, part time work or casual.
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Employers have to pay a minimum of 11% of your wage into your super account. That's called the superannuation guarantee and they need to pay it at least every three months. So the superannuation guarantee is going to increase to 11.5% in July 2024 and then increase again to 12% in July 2025. The other good news is that from July 2026 your employer will need to pay your super at the same time that they pay your salary or wages.
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This means it'll be easier for you to track that the right amount of super is being paid at just the right time. What's more, when your super is paid faster, it'll get working for you sooner. Meaning it's going to be invested sooner, it's going to compound more and it's going to grow to something bigger by the time you retire.
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Now, just under 3 million Australians are underpaid by their employer on their super contributions by about 1700 dollars on average each year. Wow. Yeah, it's pretty significant. And this is money that you're entitled to. And the ATO wants to turn this around with super paid on pay day. Now I need to make your way if you're employed as a contractor, that's where you invoice someone for the work that you do and you use your own ABN.
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You have to arrange your own super contributions. It doesn't happen automatically. You can also make voluntary contributions into your super fund on top of anything your employer pays as a contribution. And we'll get into the detail on voluntary contributions a little bit later. But needless to say, there is lots of ways that you can pay money into super.
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Okay, so I could completely bamboozle everyone with a pile in numbers here. But if you want to get into more of the details, you can search super on the government's money. Smart gov dot EU website or the tax Office's website at the ATO dot gov data and both resources have lots of great information in very plain language. To help you better understand your super.
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That's really helpful because those thoughts are are often really good source of information. So walk me through the different types of super funds available. Well, most Australians have these super in funds such as an industry super fund, and that's connected to their workplace or in a for profit retail fund which is offered by a financial services company. There's also a very small portion of Australians who use what's called a self-managed super fund, which is basically a private super fund that they manage themselves.
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So they it's sort of three main options. Well, that's helpful. Okay. So we've gone through a bit of an overview of the basics about super. But when we come back after the break, we'll be looking at why your super could be more important than you think.
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Welcome back. We've covered off the superannuation basics and the different types of super accounts with financial wellbeing coach Betsey Westcott. So Betsy, why is super so crucially important for women? Well, this is the money that set aside while working and it's invested and it grows. And then when you decide you want to stop working or you reach retirement age, this asset is used to pay for your lifestyle.
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So it's really your income in retirement. And whether or not you pay attention to this and really look after it can be the difference between cruising the Med with your besties in retirement or cruising Parramatta River. I know, me too. So when you retire, a super is is probably going to be your biggest asset outside the family home.
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And if you don't own your own home, it's probably going to be your biggest asset overall. Now younger people are likely to have more money in their super account than their bank account because it's compulsory savings and set aside by your employer. So it's really an important asset and it's your money. At the end of the day, it's not.
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This thing's sitting over there. It doesn't belong to your employer, it's your money. And so this is why you should really care about it. And I, I know it's a chunk of money that you might not be thinking about, but if you can pay it, a little bit of love and attention right now while you're working, it is going to reward you and make your life so much more comfortable in the future.
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And in addition to the money in your account, many people's super also includes insurance policies. Now, when we think about insurance, it's kind of like a safety net. A safety net in the event that you become injured or you become ill or can't work. And if you die, it may also pay out a large sum to your family.
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So super isn't just the investment, but it's often these insurance policies and worth quite a bit of money to you and quite a bit of support to you. And a lot of people don't even realize that they have insurance in their super. So that can be something that you might want to put on your to do list. It's absolutely worth checking out because super funds might offer things like income protection, title, permanent disability protection or insurance and life cover.
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And again, we've done a whole episode on that where you can get into the definitions. But again, check your super, see what you've got there. If you've got multiple policies, you might be paying for things that you don't need potentially. Now the goal of your super is to keep it invested for as long as possible. It's there to support you in your retirement.
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But of course, if you do have some real severe financial hardship or if you incur a terminal illness, you may be able to access money from your super fund early. But again, it's really not the intent. The intent of your superannuation is for you to contribute money into it whilst you're working and then for that money to be invested and grow so that you can live off it in retirement.
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So why are women missing out with super? What can we do to fix it? It's a good question. There's actually quite a few things that play into this overall, and we mentioned a couple of them at the top of the episode, but basically one of them is that women tend to work in areas that aren't as well paid as the more male dominated professions.
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And even in those industries, they tend to earn less than their male colleagues. So women on average are paid less and accrue less in their super during their lifetime. We're also more likely to take on the lion's share of those caring responsibilities, which often means we work part time or we work casual jobs and as a result we tend to earn less and are less likely to hold a better paid job or those more senior positions where we are paid more overall.
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And yes, that taking that time out of the workforce to raise a family or look after our parents does have an impact. Research by research shown that on average a woman will take 4.2 breaks from work over their career, and when they come back from a career break, they tend to earn around 29% less than their male counterparts.
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The effect of those forgone super contributions compounds to almost $160,000 less in retirement savings at retirement. And then a lot of this gets exacerbated by compounding returns. So your money that's invested into your super balance is invested into the market and the returns it generates for you are then also reinvested and begin to earn you additional returns. It's a cool feature of the super system that helps you grow your savings.
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And if you're not working, not only are you not contributing, but you're missing out on the additional returns. Those contributions would have generated over time. But there are things you can do to improve these outcomes, right? So in the last part of this podcast, you'll be sharing tips on how women can boost their super situation. Yes, I absolutely will.
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And then this is the thing you really can improve your super situation by just taking a few small steps. And I'll share these tips on how women can go about boosting their super. But my biggest tip for women to get more out of this super is the early start, the better. Now I'm saying the earlier you start, the better.
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But let me also emphasize it's never too late to sort out your super. So even if you're a 55 year old health professional or teacher in the later stages of your career, you've still probably got another ten years or so of work in which you can do a lot to improve your superannuation balance in that time. So it's never too late to pay attention to your super.
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So then what is my first step? Okay, so the very first step is actually getting a hands on your super statement, getting the logins to your account and having a look at what is going on. So the first thing I would be looking at is trying to sort of get a gauge on how is my super fund performing in comparison to other super funds in the market and also having a look at like are the fees that I'm paying reasonable in comparison to other super funds.
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Now, if you've never looked at this before, it might be a little bit tricky to work out like what is good. So there's a really handy tool called your Super. It's a comparison tool and it's available on the myGov website. There's also a lot of other comparison tools available in the market, but the myGov one is one that you might want to use it as a first point of call.
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Now, if you have a look at this and you think, my goodness, my fund is not performing like it should, it's not keeping up with the rest of the market, then that's a good trigger to get some advice from a professional and have a look at like what other super funds are available in the market and identifying who you might switch to.
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Of course, before you make the switch, make sure that you're not going to accidentally close out any insurance policies you wanted to keep or ensure that you're setting up new insurance policies with your new super fund provider. The second thing I would be looking at is how is my money being invested and how you invest The funds can really influence the results, the returns, the final balance of your super funds.
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So most super funds will offer pre mix investment options such as a high growth investment right down to a conservative investment. Somewhere in the middle is the balanced investment option. Also, if you're someone who really cares around ethics about ethical investing and using your money as a force for good, then you might select an ethical investment option. And again, that's up to you.
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But you, as the person who owns the super fund, you get to choose how your money is invested. Now, the third thing I want to say is that if you've ever switched super accounts or relied on your employer to put your super into a default account in the past, you should double check to make sure you don't still have money stretched across multiple accounts.
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So basically check that you don't have like three or four super accounts floating around. If you give them the right approvals, your fund can consolidate all your super balances into one. And again, the benefit of doing that is that you're not paying multiple sets of fees on multiple insurances. And now the big help is to make some voluntary contributions to your super.
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So that's topping up your super with extra cash. Again, the magic of compound interest means that any little extra you put into your superannuation fund early can mushroom into a substantial amount over time. So each year you can make pretax contributions up to a cap of 27,500. Now that figure does include what your employer is putting in. So 27,500 less, what your employer puts in is what's available for you to top up in pretax dollars.
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You are able to put more in than that and you can basically contribute up to 110,000 extra in after tax contributions. This is called a non-concessional contribution to super each year. Now, most of us wouldn't contribute anywhere near that much, let's be honest. But it is something to keep in mind. Say you came into a financial windfall. Maybe you received an inheritance or you downsized your home and you were thinking, How can I get some extra money into super?
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That might be an option you can consider. I know we're going through lots of dates. How are you going? I'm okay. I'm okay. But, you know, I've got in the back of my head salary sacrificing. So what do I need to know about that? Well, that is a way that you can put extra money into super, and that's usually with those pretax contributions.
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The one that has the cap of 27,500. And this is a really helpful strategy to consider if you know that you've got a career break coming up where you're not going to be contributing to super, you can start putting a little bit away ahead of time to kind of offset that career gap. That's certainly what I did through my twenties and it has definitely boosted my balance.
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Now, if you are on parental leave, you can look for ways to try and put money into your super. If your employer is not not paying superannuation on your parental leave. And the benefit of doing this is that you're not going to be disadvantaged at retirement. You're still getting that money in there, it's getting invested and it's growing for you.
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Now, if you are on leave or taking a career break, you might be able to get the government to pitch in and top up your super for you. So I like the sounds of that. Yeah. Free money now. Okay, I'm going to get a little bit technical here. Some numbers that stay with me. So if you're earning less than $58,445 in the 2023 to 2024 financial year and you contribute $1,000 to your super fund, the government may also co contribute another $500.
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So 1500 dollars. Wow. Okay. Yeah. So that's nice. We like that. Of course, if you're married or have a spouse, they can also top up your super while you're not earning a lot of money and they can claim up to a $540 tax offset while you're on parental leave, provided you're not working or have a lower income, your spouse also has the ability to split their super contributions with you.
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So that's another option to consider when you're on parental leave and you're doing all the caring work and your partner is still working and putting money in their super, you might be like, Hey, why don't we split your super so we both get some money in our retirement accounts whilst I'm doing the bulk of the caring work enabling you to work.
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That's a great idea. Yeah. So that's a conversation you might want to bring up with them. And then finally, for something you might not have thought about, there's a service that you can sign up for. I personally love it. I mentioned it in an earlier episode, but it's called Grow My Money and basically it puts a percentage of the money you spend with selected retailers into your super account, which means money's going into super, it's investing and it's growing your overall retirement.
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So that's worth checking out too. I love Grow Your Money. I'm definitely going to check that one out as well. So it's a bit we've talked a lot about how we start to build a super fund. So what about once we're in or nearing retirement and how do we make our savings last? Because I think it's a real fear we might run out of money.
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Yeah. And like, no one wants to be, you know, seeing out their twilight years, eating baked beans and the size and affinity for baked beans enticed by in which case all that money. But yeah, so look, that's a really good question. How do you make the money last? How much should you be pulling out to live off? You know what's appropriate?
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The answer is not a one size fits all answer. It's really going to depend on your lifestyle, on the balance of your savings and your personal circumstances. So in this case, this is where it really pays to get good quality, personalized financial advice. So I would be getting that from a suitably qualified financial adviser. But look, I know I can't give a specific answer, but what I will say is there's plenty of options around how you can use your super fund.
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Some people decide they want to take it out as a lump sum and pay off big debts like their mortgage. I've certainly seen people use it to buy that caravan and become a gray nomad. Others will decide, No, I want to convert it into what's called a a like a pension or an annuity and live off the income of that.
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And they sort of set it up as what's called an account based pension. And that provides a steady stream of income, kind of like when you were working. There's just money coming in regularly. So it will really depend on what your preferences, but there's lots of options there. You're not alone if you worry about running out of money in retirement.
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So I know lots of people worry about this and they try not to take too much out. But again, this is where that advice is really helpful. You should be mindful that there's a mandated minimum that you will have to take out of your super each year if you're taking out an account based pensions. Again, like there's lots of rules in place, get good advice.
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Really, Yeah. And then depending on how much super you have, you may be entitled to the age pension. So that's the government paid pension. And really your eligibility is going to depend on when you were born and what level of assets you have. So go to the Australian Government's Social Security guide and get more information or have a chat to Centrelink and get them to give you a bit of a guide on what you might be eligible for.
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So we've talked about super in a couple of different episodes. This has been a great deep dive. So super is really complex tidbits. She I think I can understand why people feel a little overwhelmed with it, but I think I've heard you loud and clear. It's important to remember that superannuation is that long term play, so investing early has really big rewards.
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Yeah, look, yes, there is complications around how much to put in and when to pull what out and all of that. But put simply, it's money set aside today to be invested so it can grow and replace or support you in retirement and pay for your lifestyle in retirement. That's in in a nutshell. So if there were things that I would want listeners to take away, it's that first and foremost, don't ignore your super.
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A little bit of love, care and attention will make you potentially hundreds, thousands, maybe hundreds of thousands of dollars richer in retirement and for women in particular, because of our career breaks, because of, you know, the gender pay gap, it's really important that we pay extra attention to our super because we are a little bit behind the eight ball.
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And like I said, we do live longer. So it's more important for us to accumulate those savings while we can, so we can enjoy a comfortable, maybe even a boozy retirement. So it's important to check if your super fund is among the top performers. You can choose where and how your money is invested. It's your money. So making sure it's invested appropriately according to your life stage is important.
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If you can make extra voluntary contributions while you're working, that is going to mean more money's going in and your balance will grow bigger. And of course, if you are taking a career break, then why not see if your partner can contribute to your super while you're not? Well, that's all we have time for today. We hope you enjoyed this episode of Women's Financial Empowerment.
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Tune in to episode eight. It's going to be a quick one with Betty when Betty and I talk about investing. So thank you so much, Betty. That was a fantastic conversation around superannuation. I'm looking forward to the next one where we talk about investment, so I'll catch you next time.
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