5 Ways to Catch up with your Super from a Career BreakMar 17, 2022
This week it's all about... language, superannuation and catching up from a career break.
I talk more about something I've been banging on about on Insta which is that childcare should not be calculated as a percentage of HER wage (and yet, that's how too many couples consider it). I also talk about the forgotten cost of a career break - superannuation - and discuss 5 ways to catch it up.
I've also dropped two calculators below.
The first compares the compounded effect of lost super compared to your childcare costs (the results are shocking!): https://www.melissabrowne.com.au/forgottencostofcareerbreak
The other shows you how much you need to be contributing to catch up your super from a break: https://www.melissabrowne.com.au/supercostandcatchup
Hi, and welcome to Mel's Money Musings.
I've been talking a lot, not just this past week, but certainly this last few months and the last decade, probably about language, childcare, career breaks and the forgotten cost of career break, which is often the compounding effect of super.
Now, the big conversation that I've had this week is how, when it comes to childcare, too often I would see a couple come in and see me and say, Hey, we're thinking like we're pregnant. And, uh, so it's always "we" at that point, but then when it comes to who's having time off it, it's not worth "her" going back to work. Cause childcare is a too large percentage of "her" wage. And I always, at that point, would say to the couple, "ah that's interesting. It started with "we're" having a child to now it's her wage. Shouldn't it really be a percentage of both of your wages?"
At this point the couple would then be challenged because too often we've been taught to believe that the rearing of a child and who's going to take a break is the female’s concern.
That may be what you believe, but then we need to then not be looking at just her wage and we're looking at whether it's worth it, but rather the whole bucket, because too often all we're doing is comparing the wage and we might go, you know what it's yeah - you know, childcare's taking up a large percentage, but what about the career, the ongoing career prospects or the thing that I see far too little, uh, considered is the compounding effect of that lost super.
And on my Insta post at More Money For Shoes, I put a tile up that is absolutely gone ballistic on International Women's Day, where I looked at the cost of having a four-year career break and for an average wage, once we compound that super, and I've gotta confess, we ran the maths more than one time because we thought we were wrong initially.
But the cost of that career break for an average woman on an average salary, her super alone is $280,000.
That's a lot of money and that's part of the reason why the gender super gap is so wide.
So what I wanted to do today here is bring awareness to that, but also talk about some things that you can do to reduce that gap. So maybe if you've already had that gap, maybe you're in the middle of the gap, or maybe you're coming up to that gap. And that gap could sure be stopping to have a baby, but it might also be starting a small business where you put your super on the back burner, or it might be having a sabbatical, taking more study, insert whatever's relevant for you, but it's wherever you stop paying super for a period of time for yourself.
So I'm gonna give you five ways that you could potentially catch up or close that gap.
But also down below, we're gonna put a calculator where you can figure out, if you curious, what that, childcare to lost super amount looks like for you, but also at the second tab is the super catch up. And there's two different scenarios. One is if you just make a small amount regularly until you retire. And then the other scenario is what if I just paid a larger amount for a smaller period of time? Could I catch up that way? So that's our gift to you.
So five ways.
One you might consider especially if you chose to stop working or your wage is much reduced, you may be eligible for the co-contribution.
So this is in Australia where the government matches the superannuation that you contribute up to certain amounts.
Now there is, uh, thresholds and earning thresholds and more so you wanna look into all that, but that can be a beautiful way to have your contributions matched by government and really, um, compound those returns.
The other thing you can do is have your partner make contributions to your super fund.
So for example, there are rebates to be had when your partner makes after tax contributions to you. And by rebates I mean tax rebates. So cash back at tax time. So the most you can contribute is $3,000, but hey, that can for some people be halfway towards making up the super that they would've foregone. And if you know you're getting cash back, then that can be a beautiful way of viewing that. Once again, there's income limits. So you wanna look into that, but that's a second way that you can start to catch up.
The other thing that you might consider is there are some funds that will pause all fees while you are having a career break, particularly maternity leave.
So I'm not suggesting that you switch to those funds simply because of the fee saving, but you might look at those funds and go, ha I love everything about them. And I love that they do this. So I'm gonna move over to that. One obvious one is Verve Super (V E R V E). So it's a fund set up particularly for women. And that's the reason they have things like pause fees when you have a career break. So you might look into them.
The fourth way is to consider making extra contributions.
So if I'm in my twenties listening to this, and I know I've got a career break coming up, cause I wanna have kids and I really wanna have that time off, consider making those catch-up contributions now because the earlier you start, the lower that has to be.
So you might either, we've got a calculator down here, as I said, where you could look at either making larger contributions for a small amount of time and then letting compound returns do the work, the rest, or just over the life of you working and earning, how much would it need to be every single month so that you catch up. For example, it might be $150 a month for 30 years to catch up on your four-year super break. But at least you then know, and you can start to make those regular contributions.
And last but not least, if you're going well, that's nice, Mel, but I don't have any extra funds. I don't have a partner and I just don't know how I'm gonna do this. Why not consider finding money that you don't have?
So for example, you might use Shopback or Cash Rewards.
So these are two platforms where if I'm shopping and I'm not talking shopping to get the rewards, I'm just talking about your everyday shopping. Uh, then you would put it on your browser. It would alert you when there's a cashback. And then you could choose when you get that cashback to put that as a contribution to super. The other thing you could do is there is something called Super Rewards where when you shop, it allows, once again, for you to have that, uh, reward or round up or other or cash back.
But this time it just automatically sends it to your super fund. So it's a different way to think about that, that break, but it's also a whole bunch of different ways that you could catch up if you've had a break.
And if you wanna take a look at the calculator to figure out how much extra would I need to contribute regularly or quickly in order to catch up, then that's all down below for you as well.