Strategies for women

To what? It has been well documented that women tend to get a raw deal from super. That's because super was designed for people who have a full working life (usually blokes), not those who take extended periods out of the workforce to do things such as raise children (usually women).

The Australian Institute of Superannuation Trustees estimates taking seven years out of the workforce costs women an average $70,000 in lost retirement savings. However, women have longer life expectancies than men and arguably need more savings to fund a comfortable retirement.

Women are also more likely to undertake part-time or casual work, again due to family commitments, which also reduces their savings.

So what can I do? A Hewison Private Wealth private client adviser, Chris Morcom, says the most effective strategy is to start early and prepare for time out of the workforce. He uses the example of Sandy and Rizzo, who both start work at 20 earning $30,000 and receive pay rises of $5000 a year (they're hard workers). At 30, both take eight years off work to start a family and go back to work part-time, earning $37,000 at the end of this period. They gradually increase their hours and at 50 return to full-time work, earning $82,000. Both are in the same super fund, which returns 8 per cent a year after fees and taxes.

The difference is Rizzo receives only compulsory super at the current rate of 9 per cent while Sandy prepares ahead. She salary sacrifices 15 per cent of her gross salary to super - in addition to her employer's compulsory contributions.

When the two retire at 60, Sandy will have almost three times as much saved as Rizzo - $930,000 versus $350,000.

Interestingly, despite taking time off, Sandy will also be much better off than their friend Danny, who starts work at the same time as the two women, under the same pay conditions and in the same super fund, but receives the compulsory 9 per cent super contributions over a full working life. Morcom says he would have about $550,000 to retire on.

It's all due to compound interest, Morcom says. The sooner you start preparing, the better, even if you do need to take time off later on. He says if you can't afford to put aside 15 per cent of your income, putting aside some savings is better than nothing. At the bare minimum, he says, women should contribute $20 a week after tax to receive the government's super co-contribution if they're eligible. In addition to your own money, the government will contribute up to $1000 a year. It's the best return you can get on your savings.

That's OK for young women but what if I don't have the luxury of having 40 years before I retire? Morcom says many strategies can be used. He says salary sacrificing into super is an absolute must and if you're eligible for the

co-contribution, it's worth making after-tax contributions to claim this as well.

If you're not working, or earning less than $10,800 a year, he says your spouse can receive a tax rebate of up to $540 for making up to $3000 in contributions on your behalf. A partial rebate is available if you earn between $10,800 and $13,000. Along with the tax breaks for her husband, Morcom says Rizzo would have received $50,000 more at retirement if her husband had contributed the maximum $3000 a year for her while she was not working.

He says super splitting - where your spouse can transfer up to 85 per cent of his past year's concessional contributions to your account - can also help to boost your super and to keep your super accounts even. This might prove beneficial if the government goes ahead with plans to allow people over 50 with less than $500,000 in super to receive concessional contributions of up to $50,000 a year from 2012, rather than being subjected to the new $25,000 cap.

Morcom says the ability to make higher contributions later in life is critical for people looking to "catch up" on their retirement savings.

If you're near retirement, he says it is important to get good advice to maximise super and non-super savings.