Financial planning is really about… addressing gender imbalance in super

The average female super fund balance is just over $40,000 (source: Australian Super Women and Super). The average man has just over $70,000. The average retirement payout for women is $112,000 whereas for men it is $198,000. The difference is $86,000.

This difference can be made up in various ways. One of the simplest, and one that women in the paid workforce are most likely to be able to access independently, is to make additional super contributions. The following table sets out how much extra a woman would need to contribute to super each month to earn an additional $86,000 by retirement age. The table assumes an average real (ie accounting for inflation) earning rate within super of 3.5%.

Years to Retirement Additional monthly contribution After-tax amount given up to fund the monthly contributions Total Additional Contribution
30% marginal tax rate 37% marginal tax rate 45% marginal tax rate

10

$705

$493

$444

$387

$84,600

15

$435

$304

$274

$240

$78,500

20

$294

$205

$185

$161

$70,560

25

$211

$148

$133

$116

$63,300

30

$158

$110

$100

$87

$56,880

Obviously, this table involves some abstraction. It assumes, for example, that a woman will not take time out of the paid workforce to raise children. This is a big assumption. What’s more, a woman paying tax at 45% is making more than twice the average male. She will probably want to do more than just catch up to the average male in terms of retirement savings.

But the table makes at least two things clear. Firstly, the earlier a woman starts to make extra contributions, the less those contributions need to be overall. Secondly, the earlier a woman starts to make extra contributions, the less day-to-day spending power she needs to forgo in order to afford the contributions.

And when a woman makes larger contributions earlier in life, she reduces the less effect having time out of the workforce has on her eventual retirement benefits.

Young people might prefer not to think about getting old. But their financial advisers should not be so shortsighted. Somewhere around 85% of young women will become mothers one day. Helping young women get themselves set should be high on the list of every adviser’s agenda. 

The Dover Group