What You Need to Know About Superannuation During a Career Break.
Taking a career break, whether for maternity leave, extended travel, or a sabbatical, is often an exciting time of personal growth and new experiences. However, it can also pose significant challenges for your superannuation and retirement plans.
Superannuation is one of the most crucial components of your retirement savings, and any break from your career could impact your contributions. Fortunately, there are steps you can take to ensure your super remains on track, even during time away from work.
In this blog post, we’ll explain how career breaks affect superannuation and provide strategies to help you maintain healthy retirement savings. Read on to learn more!
1. How Career Breaks Impact Your Superannuation
When you're on a career break, whether it’s for maternity leave, extended travel, or a sabbatical, your superannuation contributions may be disrupted. Let's break down how each of these career breaks can affect your retirement savings.
Maternity Leave
Lower or No Contributions: When you take maternity leave, your income may decrease or stop entirely. If you’re not receiving regular income, your super contributions may also be affected since most contributions are based on your salary.
Government Contributions: If you're on government-paid parental leave, superannuation contributions may still be made to your super fund, but they might not be at the same level as your regular contributions.
Extended Travel
Gaps in Contributions: If you take an extended period off work to travel, you may not be making any super contributions during that time. As a result, your super balance could stagnate while you’re away.
Missing Employer Contributions: While travelling, if you’re not employed, you won't receive employer contributions, which means your super fund will be missing out on regular contributions.
Sabbaticals
Reduced Contributions: Similar to taking extended leave, a sabbatical may result in a period of reduced or no super contributions, depending on your employment arrangement.
2. Strategies to Keep Your Super On Track During a Career Break
While taking a break from work can temporarily impact your superannuation, there are several strategies you can implement to help keep your retirement savings on track during this time.
Contribute to Your Super During Your Career Break
Make Personal Contributions: If you're not receiving employer super contributions, consider making personal contributions to your super. Even small, regular contributions can help you maintain your balance.
Salary Sacrifice: If you're working part-time or receiving some income during your break, consider salary sacrificing part of your salary into your super to increase your contributions.
Spouse Contributions: If your partner is still working, they may be able to contribute to your super fund. This can help to boost your super balance during the time you're not working.
Take Advantage of the Government Co-Contribution Scheme
If you're eligible, the Australian government’s co-contribution scheme allows low and middle-income earners to receive a co-contribution to their superannuation. If you make after-tax contributions to your super, the government may match your contribution up to a certain limit.
Eligibility: To qualify for the co-contribution, your income must be below a certain threshold (currently $56,112 for the 2024-25 financial year). If you’re on a career break but still earning income, this scheme can provide a useful boost to your super.
Consolidate Your Super Funds
If you’ve had multiple jobs, you might have multiple super funds. During a career break, you may have more time to consolidate these funds into one. Consolidating your super helps reduce fees and ensures that all your contributions are working towards the same retirement goal.
How to Consolidate: You can consolidate your super accounts by contacting your super fund provider or using the Australian Taxation Office (ATO) online tools to combine your super funds. It’s a simple process that could save you from paying multiple sets of fees.
3. How to Stay on Top of Your Super During Your Career Break
It’s important to be proactive when managing your superannuation, especially during a career break. Below are some practical tips to help you stay on top of your super during your time off work.
1. Monitor Your Super Fund Regularly
Even when you're not working, take the time to check your super balance. Many superannuation funds allow you to track your balance and contributions online. Keeping an eye on your super ensures that you’re aware of how your funds are performing and whether any adjustments need to be made.
2. Maintain Investment Strategy
When you're on a career break, you may want to review your super’s investment strategy. If you're taking an extended break or planning to travel, you might be looking for lower-risk investments to preserve your balance. On the other hand, if you’re still far from retirement, a higher-risk strategy might be appropriate to generate higher returns.
Low-Risk Investments: For a career break, consider moving your super into more stable, low-risk investment options (such as cash or conservative options) to protect your savings.
3. Seek Professional Advice
A financial advisor can help you make the right decisions regarding your super during a career break. They can assess your current financial situation, discuss your long-term retirement goals, and recommend the best strategy for your super.
Personalised Strategy: If you're unsure about how your career break might impact your super or how much you should be contributing, a financial advisor can offer personalised advice to help you stay on track.
4. The Importance of Staying Consistent with Your Retirement Goals
Regardless of how long your career break lasts, it’s crucial to keep your long-term retirement goals in mind. A career break is only temporary, but the impact it can have on your superannuation can last for decades.
Reevaluate Your Retirement Goals
During your career break, use the time to reassess your retirement goals. Has your lifestyle or financial outlook changed? Do you need to adjust your contribution strategy to make up for the gap during your time off? Re-evaluating your goals periodically can help you make better financial decisions in the future.
Catch Up Later
If you’re unable to make the full super contributions during your career break, you can "catch up" once you return to work. If you’re eligible, you can increase your contributions in the future to compensate for the missed time.
Conclusion – Plan for the Future, Even During Your Career Break
Taking a career break doesn’t mean you have to let your superannuation and retirement plans take a backseat. By staying proactive and applying strategies like personal contributions, salary sacrifice, and government co-contributions, you can maintain your super balance and continue working toward your retirement goals.
If you're unsure about how to keep your superannuation on track during a career break or need help with your retirement planning, consider seeking advice from a financial planner. At Redwood Financial Planning, we’re here to guide you through these life changes and ensure your retirement savings stay strong.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial, tax, or investment advice. We recommend speaking with a qualified financial adviser before making any decisions regarding your superannuation. Every individual’s financial situation is unique, and personalised advice is essential to ensure the best outcome for your specific circumstances.
