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Women could retire with $140,000 more by refinancing their home loan


Woman smiling working on her computer.

Refinancing your mortgage and contributing the savings into your super fund is one strategy women can use to increase their super balance.

Women are retiring with almost 50% less super than men. And while there are many things that contribute to the super gap (including the stubborn gender pay gap and women taking time out of the workforce to raise children), the fact remains that the super gap exists. It's also one of the reasons why women over the age of 55 are the fastest growing demographic of people experiencing homelessness in Australia.

"We live in a lucky country, especially when it comes to our super system. But women aren't benefiting from this anywhere near as much as men are, in fact, only half as much," said Athena's chief of product Mira Horne.

"After spending their working lives smashing glass ceilings, leaning in, pushing for pay equality, raising children and caring for parents, Australian women are rewarded with 47% less superannuation than men at retirement, and then go on to live 5 years longer."

There are many things that could help close the super gap. We still have a gender pay gap of about 14% between what men and women earn. Because super is paid as a percentage of our annual earnings this consequently means men are earning more in super, too.

Another factor contributing to the super gap is that more women take time out of the workforce than men to raise a family. This means that not only are women not earning super guarantee payments from their employer through this time, but they're often still being charged super fees by their fund. There are a few funds starting to remove these fees whilst members are on parental leave.

A lot of these things require legislative changes to the superannuation sector at large, and aren't something we have direct control over. But here's a few things you can do today (or tomorrow) to help boost your super balance.

Add $140,000 to your super by refinancing your mortgage

Digital mortgage lender Athena ran the numbers and figured out that if women refinance their mortgage early on in life and add the monthly savings to their super, they could retire with a balance that not only meets but exceeds that of the average Australian male. This is thanks to the power of compounded investment returns from adding to your super consistently from a young age.

"We calculated that an average 35-year-old woman, with a standard mortgage of $450,000 with 25 years remaining, on a typical big bank mortgage rate of 3.32%, could end up with $140,000 extra in her super fund by refinancing to a lower rate and contributing the monthly savings to her superannuation fund," said Horne.

"By simply refinancing to a better interest rate, for example, Athena's standard variable P&I owner occupier rate is 2.59% (2.55% comparison), the monthly savings are $171. Over the life of the loan she could save herself or her family around $50,000."

"And if she contributes that $171 into her superannuation fund every month over the remaining life of the loan until age 60 (and assuming 20 year returns to super of 7%), she'll increase her final super balance by an incredible $140,000 at age 60," she said.

"The takeaway? You can keep putting money in your bank's pockets, or you can pay your future self. I know what I prefer."

Athena's calculations are based on a woman refinancing with 25 years left on the loan, but if you refinance later than this there's still plenty of savings to be made.

Switch super funds and consolidate to save thousands in fees

The more you're paying in super fund fees the less you'll be left with at retirement. Past research by Stockspot found that millennials on average could be looking at a final super balance of $846,957 if they're with a high-fee fund, compared to $1,178,081 if they were in a lower-fee fund.

This is even worse if you've got multiple funds, as you'll be paying multiple sets of fees. So it's important to compare super funds, switch, and consolidate so you've only got the one fund.

There's no black-and-white rule as to what you should be paying in fees, because it will vary depending on the type of fund, the investment option and risk level of the fund. But it's usually considered to be high-fee if your total annual super fees are in excess of 1% of your balance.

Salary Sacrifice into your super

Salary sacrificing is the process of diverting some of your pay (before any tax is withheld) into your super fund instead of into your bank account. There are many benefits to this, one being that super is taxed at the lower rate of just 15%.

By salary sacrificing some of your pay into your super, you're also reducing your taxable income which means you'll pay less tax at tax time.

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