Planning for a comfortable retirement involves more than just relying on your superannuation. While super is an essential part of retirement savings for Australians, high-income earners and high-net-worth individuals often need additional strategies to sustain their lifestyle and financial goals during retirement. By diversifying your approach and exploring avenues beyond superannuation, you can build a robust retirement plan that ensures long-term financial security.
This article explores effective strategies for high-net-worth individuals to supplement their retirement income through investments and savings outside of superannuation.
Why Look Beyond Superannuation?
Superannuation provides a tax-advantaged and regulated way to save for retirement. However, it has limitations, especially for those with higher earnings or wealth, including:
- Contribution Caps: Annual and lifetime caps on super contributions restrict how much can be added in a tax-efficient way.
- Access Timeline: Super funds generally cannot be accessed until you reach preservation age, which may limit flexibility for early retirees.
- Diversification Needs: While super offers investment options, relying solely on it may expose wealth to unnecessary risk.
To overcome these limitations, supplementing your superannuation with other strategies can enhance your financial security and freedom in retirement.
Diversifying Your Retirement Strategy
Here are key strategies that high-income earners and wealthy individuals can leverage for retirement planning beyond superannuation:
- Build a High-Performing Investment Portfolio: Investing outside of superannuation can be an excellent way to grow wealth that is accessible before and during retirement. Focus on creating a balanced and diversified portfolio that includes:
- Shares and ETFs for steady growth potential and dividends.
- Bonds for lower-risk income generation.
- Real Estate investments for capital appreciation and rental income.
Diversification is key to managing risk and weathering market fluctuations.
- Consider Real Estate Investments: Property has long been a favourite wealth-building tool. Real estate investments can provide a reliable income stream through rental yields while appreciating in value over time. High-net-worth individuals may explore:
- Residential property investments for capital growth.
- Commercial property for consistent returns and longer-term leases.
- REITs (Real Estate Investment Trusts) for exposure to the property market without direct ownership.
Always consider location, market trends, and potential tax benefits when investing in real estate.
- Look Into Managed Investments and Trusts: Managed funds and investment trusts allow individuals to pool resources into professionally managed portfolios. These options are ideal for diversifying exposure to different markets and asset classes without the need for hands-on management. Consider:
These options can align with your retirement goals while offering flexibility in asset allocation.
- Set up a Family Trust: Family trusts can be a viable way to generate income, safeguard assets, and minimise taxes. They allow you to distribute income or capital gains to family members, potentially achieving lower tax rates. Trusts also provide flexibility in terms of asset control and succession planning.
Consult with an estate planning specialist or financial adviser to set up a trust tailored to your needs.
- Utilise Investment Bonds: Investment bonds, also known as insurance bonds, are tax-efficient tools that high-net-worth individuals can use to invest for the long term. They are particularly useful because:
- Earnings are taxed at a flat corporate tax rate (currently 30%) instead of your personal marginal tax rate.
- Funds can be accessed without triggering additional tax liabilities if held for at least ten years.
They offer a degree of flexibility and can be a core component of a diversified strategy.
- Leverage Annuities for Secure Income: Annuities provide guaranteed income streams, acting as an effective complement to other investments. You can purchase annuities with a lump sum and receive payments either for a fixed period or for life. While these vehicles may not offer significant growth, they provide certainty and stability.
- Explore International Investments: For those looking to broaden their horizons, international investments can provide significant growth opportunities while mitigating portfolio risks associated with domestic markets. Options include:
- Overseas property.
- Global shares, ETFs, and mutual funds.
- Currency-based investments.
Stay informed about foreign tax regulations and currency risks when venturing into international markets.
- Estate Planning and Legacy Strategies: High-net-worth individuals often seek to ensure that their wealth extends beyond their retirement, passing it on to future generations. Effective estate planning includes:
- Establishing a will or trust to distribute assets according to your wishes.
- Structuring inheritances to reduce taxes for beneficiaries.
- Incorporating philanthropic giving or charitable foundations.
Estate planning not only secures your legacy but can also optimise tax outcomes.
Maximise Wealth with Expert Guidance
Navigating the complexities of retirement planning beyond superannuation can be overwhelming. High-income earners and wealthy individuals, in particular, can benefit immensely from professional advice. A financial adviser or wealth manager can:
- Design customised strategies tailored to your financial situation and retirement goals.
- Help you manage taxation, cash flow, and risk.
- Provide insights into market trends and investment opportunities.
By partnering with experts, you can enhance your financial security while maintaining the lifestyle you’ve worked hard to achieve.
The Bottom Line
Planning for retirement as a high-net-worth individual requires a multifaceted approach. While superannuation remains a critical component, looking beyond it can unlock greater financial potential, flexibility, and security. Diversifying into investments, trusts, and other financial tools not only ensures a steady income during retirement but also preserves wealth for future generations.
If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.