As a high earner, it’s important to consider retirement investment strategies. If you are in the top tax brackets, it’s likely you are accustomed to living an expensive lifestyle. To maintain your standard of living in retirement, financial planning is crucial. You’ll need to build the financial foundation to support your lifestyle once your employment income ends. With appropriate planning and early engagement, many high earners are able to maintain their lifestyle into retirement.
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 retirement planning 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 wise to start thinking about retirement investment strategies as early as possible. The earlier you start investing for retirement, the sooner you can retire or reach your retirement goals. You may also have more time to benefit from compounding, which Einstein famously called the 8th wonder of the world. Starting early could give you more time to use the various allowances available for long-term saving and investing.
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, 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 may be 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:
Diversified investment portfolio
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
- Alternatives
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 manage risk and provide a structured approach to generating income in retirement.
Property Investment
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 still being at elevated levels. However, property can still form part of a diversified retirement strategy. You can read more about the current challenges Britain’s buy-to-let investors face, in ourguide.
Tax-efficient retirement strategy
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. As a result, it may be sensible to invest within tax-efficient investment vehicles such as pensions and ISAs. These can offer certain tax advantages, such as relief on contributions or exemption from capital gains tax, depending on the product and your individual circumstances.
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’re in your 60s and have just sold a business, generating income may take 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 a combination of both, as people often have pots of money set aside for different objectives. Focusing on both your goals and risk tolerance can 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.
Regulatory Information
- 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.