As a high earner, it’s important to consider retirement investment strategies. If you are in the top tax brackets, the chances are you are accustomed to living an expensive lifestyle. To continue enjoying this standard of living in retirement, financial planning is essential as you will have needed to create the financial infrastructure to support that lifestyle once your income from employment stops. This is usually very achievable, but it does require planning and early engagement.
In this guide, we highlight some retirement investment strategies that are popular among those on high incomes. Whether you plan to travel the world, pursue new hobbies, or spend time with friends and family, these strategies could help provide financial security for you and your family.
When should you start planning your retirement investment strategy?
While everyone’s circumstances are different, it’s generally a good idea to start thinking about retirement investment strategies as early as possible. The earlier you start investing for retirement the sooner you will actually be able to retire or indeed reach the retirement goals that you have set for yourself. Not to forget, the more time you’ll have to capitalise on the power of compounding which Albert Einstein famously referred to as the 8th wonder of the world! Starting early will also give you more time to take advantage of the various allowances that are available to those who are looking to save and invest for the future.
Of course, not everyone starts investing for retirement early on, but it’s never too late. Even if you are in your 50s or 60s now, you still have time to put a retirement investment strategy in place, after all, you could still have decades to grow your wealth.
When starting out, it’s sensible to spend some time on cash flow planning, ideally with the help of a financial planner. This will help you determine how much you actually need to invest for retirement so that you can continue to live the lifestyle you have become accustomed to and hopefully achieve some of those bucket list things you have always dreamt of doing.
Which retirement investment strategies should I consider?
When it comes to investing for retirement, there are a number of different approaches to consider.
You might consider the use of a diversified investment portfolio where the objective is to achieve the best possible return for a given level of risk. This type of portfolio will make use of Equity, Fixed Income, and Alternatives market returns. The mix of these three asset classes will be determined by the level of risk that is appropriate for your retirement savings. These portfolios are designed to provide consistent and predictable investment outcomes and the portfolio will be the foundation of providing you with an income during your retirement.
Another strategy is to consider property investment. However, in recent years, the government has introduced very punitive measures and regulations that have made buy-to-let investing far less attractive. In short, the barriers to entry in terms of costs have significantly increased and the rental yields have fallen due to high levels of taxation. More recently, this has been impacted further with much higher borrowing costs due to interest rates being at elevated levels. However, property can still from part of a diversified retirement strategy. You can read more about the current challenges Britain’s buy-to-let investors face, in our recent guide.
Finally, and perhaps the most important factor, is to ensure that your strategy is as tax efficient as possible. As a high earner, the difference between your pre-tax returns and post-tax returns is likely to be significant. So, it’s sensible to invest within tax-efficient investment vehicles such as pensions and ISAs, which protect against various forms of taxation such as Capital Gains tax and Income Tax and in some scenarios allow you to claim tax back from HMRC.
A financial planner can help you construct the most efficient retirement strategy that takes into account all of the above.
How to decide which retirement investment strategy is right for you
When determining which strategy is right for you, your age, time horizon, goals, and lifestyle will be crucial factors. If you are in your 40s and still working, for example, generating long-term capital growth from your investments may be your main goal. If you are in your 60s and have just sold a business, on the other hand, generating income may be more of a priority.
Your risk tolerance will also have an influence. Is capital preservation your main priority? Or are you comfortable taking on slightly more risk in the pursuit of higher long-term returns? For many it is actually a combination of both as we all tend to have pots of money that are set aside for different objectives. Focusing on both your goals and risk tolerance will help you determine how to invest your money in the most meaningful way.
Next steps for your retirement investment strategy
Choosing the best retirement investment strategy can be a daunting task. There are many different ways to build a portfolio today and there are a lot of factors to consider.
Given how much is at stake, it makes sense to consult a financial planner. A planner will take the time to discuss your goals and risk tolerance and then put together a retirement investment strategy designed specifically for you.
At Bowmore, we have significant experience when it comes to developing retirement investment strategies for high earners. Want to find out more about how to make the most of the money you have, and how to secure your family’s future?
Get in touch with us today.
BOWMORE FINANCIAL PLANNING
PHONE 01275 462 469
Bowmore Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
The Financial Conduct Authority does not regulate Estate Planning, Inheritance Tax Planning or cash flow Planning.
Bowmore Financial Planning Ltd is not regulated to provide tax advice.
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.
The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in future.
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.
