Super baby debt
Having a family can create a ‘super baby debt’ for mothers of up to $50,000 by the time they reach retirement age. Taking time off work means you may not have any employer contributions being paid into your super account. And if you are taking a few years off, this can have quite an impact on your retirement nest egg. Even if you are working part-time at all during this period, then your employer will only pay money into your super account if you’re earning more than $450 a month. To overcome this problem, women should adopt the ‘one per cent rule’ by adding an extra one per cent to their superannuation contributions for the rest of their working lives. You should also think about what you can do to continue to build on your super savings while you are out of the workforce. One way of doing this is for your partner to make contributions on your behalf. ‘Spousal contributions’ are where your spouse makes a contribution to your super account and they receive an income tax rebate. It’s a great way to keep growing your super while you’re taking time off; be it to raise a family, or for other reasons. More Super Guru information on spousal contributions.
Also, don’t forget about the government’s co-contribution scheme. If you are a low or middle-income earner, you can make an after-tax contribution of $1,000 a year to your super account and the government will provide up to 50 cents for each dollar you contribute, up to a maximum of $500, provided you meet the eligibility requirements. If you’re taking a few years off, it’s certainly something to consider. But remember, you can always put extra into your super account. Give your fund a call to see what options are available to you to make extra contributions. To find out more, see our Making contributions section or the ATO’s Super co-contributions page.