Most couples build a life together but their super remains separate. We share two strategies which help couples bridge the super gap.
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All information contained in this article is general advice only.
If you're in a long-term relationship, chances are you've probably merged a few financial accounts already.
Think: mortgage (or rent), bills and family subscriptions to Netflix and Spotify.
But there's one major part of your financial life that may be sitting in separate corners… your super.
Which is a bit strange when you think about it.
While most couples are building a life together, they often build their retirement savings separately.
And over time, that may create a pretty significant gap.
Research shows that women approaching retirement in their 50s, have on average 33% less super than men in the same age group
In most relationships, income isn’t earned equally. And over time, that difference can flow through to super balances.
One person might earn more because of their industry, experience or role. Then throw kids into the mix, and a few years of parental leave or part-time work can make the gap even wider.
You can think of it like two retirement buckets.
Every year, super contributions drip into both buckets. But if one person earns more, their bucket is likely filling up faster.
While certain career decisions might make perfect sense for the household, they often have a long-term impact on retirement savings.
In fact, the Workplace Gender Equality Agency found that Australian women retire with around 42% less super than men on average.
Yup. 42%.
But the good news is there are a few ways couples can actively work on closing that gap.
A spouse contribution is where one partner contributes some of their own after-tax money directly into their partner's super account.
This is like turning on an extra tap and filling up the retirement bucket that's falling behind.
Couples may use this strategy when one person is earning less, working part-time or taking time away from work.
You can make an after-tax contribution to your partner’s super directly through their fund (via BPAY), alternatively their fund may have a separate form to facilitate the spouse contribution.
And there's a potential bonus.
Depending on your partner's income, you may be eligible for a tax offset of up to $540 for making spouse contributions!
A few things to keep in mind:
Super splitting tackles the same problem, but in a different way.
Instead of adding new money into the super environment, it allows one partner to transfer some of their concessional (before-tax) super contributions into their spouse's super account.
Think of it as pouring some water from the fuller bucket into the emptier one.
Overall there’s the same amount of water between the two buckets, but it’s being redistributed.
Couples may use contribution splitting when one person's super balance is growing much faster than the other person’s super balance and they want to gradually even things out over time.
You can apply for this through your super fund using the ATO's contribution-splitting form (or your fund's version of the form). But note that super funds don't have to approve every request, and there are limits on how much you can split.
A few things to know:
Even if you're staying together for the long haul, evening out your super may have its benefits.
In retirement, everyone has a limit on how much super they can move into a tax-free retirement phase account - this is called the Transfer Balance Cap. A lopsided super balance can mean one partner hits their cap early while the other's goes unused.
Strategies that help even out super balances, such as spouse contributions or super splitting, may help couples make better use of both caps and the amounts that can be accessed tax-free in retirement.
If one partner has already used up their contribution cap for the year but still has extra money they would like to invest, directing it into their partner's super (if they still haven’t hit their contributions cap) means it can keep growing in a super environment, where earnings are generally taxed more favourably.
And since super access rules are tied to age, a better-balanced nest egg can give a couple more flexibility over when each person can start drawing on it.
If you're making extra contributions to your (or your partner’s) super, where that money gets invested matters too.
Netwealth Super Accelerator gives members flexibility to choose from a broad range of investments, including shares, ETFs and professionally managed options.
So whether you're building your own balance or helping grow your partner's, you can take a more hands-on approach to how your super is invested.
Because while super is held individually, retirement is often something couples plan for together.
Flux disclaimer:
The Information contained in this article is general information. It does not constitute legal, tax, credit or financial advice and is not tailored to an individual’s circumstances. You should consider your own personal circumstances and seek advice from your professional advisers before making any decisions that may impact your financial situation.
Netwealth disclaimer:
All information contained in this article is general advice only. It does not constitute legal, tax, credit or financial advice and is not tailored to an individual’s circumstances. You should consider your own personal circumstances and seek advice from your professional advisers before making any decisions that may impact your financial situation.
Netwealth Superannuation Services Pty Ltd issues Netwealth Super Accelerator. Netwealth Investments Limited issues the Netwealth Wealth Accelerator Multi-Asset Portfolio Service. Information contained within this post is of general nature only. Consider whether the products are appropriate for you and seek advice where required. To help you decide, read the PDS or IDPS Guide and TMD available at Netwealth - Super & Investment Solutions - Investors & Wealth Professionals.
The Information contained in this article is general information. It does not constitute legal, tax, credit or financial advice and is not tailored to an individual’s circumstances. You should consider your own personal circumstances and seek advice from your professional advisers before making any decisions that may impact your financial situation.
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