- On March 8, 2016
Hopefully, International Women’s Day (March 8) may prompt more of us to reflect on Australia’s gender retirement savings gap. This gap is among the most critical aspects of gender inequality in Australia.
Average superannuation balances are higher for males than females in all age bands. However, the gender savings gap increases markedly from age 35 as the majority of women take time off to have children – and they lose promotion at work. The gap never closes.
By age 55-59, men had an average superannuation balance of $209,000 at June 2014 against an average balance for women of $149,000 – a gap of $60,000.
A point worth thinking about on International Women’s Day is that our gender retirement savings gap is caused by many of the factors that contribute to gender inequality in general.
Such factors include the gender pay gap with women having lower average incomes, the majority of women interrupting their careers to raise children and the lack of women holding senior positions in the workforce.
Women frequently struggle to restore their finances after a relationship breakdown. Many divorced women with young children spend long periods out of the workforce and would have difficulty contributing to superannuation during that time. If and when they do return to work, women have to deal with lower average incomes than men, further inhibiting their ability to save for retirement.
As females on average are expected to live about three years longer than males, their lower average retirement savings have to stretch over a longer period. Increasing longevity means young people today, particularly women, will have to retire later or save more for their extended years in retirement.
How can you to help reduce the retirement savings gender gap?
In Rice Warner’s submission to the Senate Economics References Committee’s current inquiry into the poor economic security of women in retirement, we suggest a range of solutions that will contribute to the closing of the savings gap. Our submission, Economic security for women in retirement, considers ways that
- superannuation funds,
- and society
can make a significant difference.
Making voluntary superannuation contributions as early as possible in their working lives is one step that women can take themselves to close the gap.
Take for example a 20 year old woman on median earnings of $55,000. She could expect to have accumulated a balance of $570,000 by the time she retires. However, should she take a 2 year career break at age 30 to raise a child her balance could be more than $30,000 lower at the point of retirement.
If a woman can make additional contributions in her twenties, these contributions will go some way to compensate for the likely pause in contributions when raising a family in her thirties. These extra contributions can act as a buffer against a career break.
Simply making an additional contribution of $33 per week between the ages of 20 and 30 could close the $30,000 career gap.
We can all help reduce Australia’s retirement savings gender gap. Think about the contribution you can make.