Building wealth beyond your super

For many, superannuation in Australia or Kiwisaver in New Zealand is the cornerstone of their retirement savings, representing a significant portion of their investment portfolio. However, understanding the benefits of supplementing retirement contributions with alternative investment strategies is important if you want to build a multi-faceted investment portfolio, rather than a singularly focussed investment in just your superannuation or Kiwisaver.  In this article, we’ll explore the advantages of making additional contributions to your account while also understanding alternative investment options outside of superannuation or Kiwisaver.

Benefits of adding money to your superannuation or Kiwisaver

Superannuation or Kiwisaver is a long-term investment that offers many benefits, making it an important component of your retirement planning. The key advantages include:

• Employer contributions (super guarantee contributions): in Australia, your employer is required to contribute 11% of your salary to your superannuation and in New Zealand, the current mandatory contribution is 3%, although you have the option to contribute 4, 6, 8 or 10% of your salary if you choose to.  
• Tax efficiency: contributions to superannuation or Kiwisaver account are generally taxed at a lower rate compared to personal income tax, meaning you can generally accumulate wealth for your retirement more efficiently. 
• Compounding growth: superannuation funds benefit from the power of compounding interest, where earnings on investments generate additional returns over time, leading to accelerated wealth accumulation.

Building wealth outside superannuation or Kiwisaver

While superannuation or Kiwisaver can be a significant investment, diversifying your portfolio beyond it can enhance financial resilience and provide additional avenues for wealth accumulation.  

When you’re considering investing, you need to ask yourself a number of questions:

• What is your investment timeline?  How long might your money be invested?  Will it be accessible?  
• Where will you invest your money? Do you understand the risks and possible returns of these options?  
• Do you understand what asset classes are?  Making sure you understand these can help you reach an outcome that best suits you.
• Do you have high interest debts? Do you need to decide if you want to pay these off first?  What’s the best option for you?  

Some investments you may want to consider

Below is an overview on some of the more popular options for investing, but remember that before making any decisions on what is right for you, you’ll need to do your own research:

• Property investing:
  • Real estate is a popular choice, offering the potential for capital appreciation and rental income.
  • Some research tips before you invest in property include researching potential locations for capital growth, considering property management services and being mindful of market trends, so that you make informed decisions. 
  • Consider if you would like to buy commercial or residential property, and if residential property is your preference, whether you would prefer a house or apartment, and whether strata or body corporate fees need to be factored.  It’s also good to understand what other regular out of pocket expenses may be payable.  
  • In Australia, refer to the Australian Taxation Office (ATO) for tax smart tips for property investment.
  • In New Zealand, consult the Inland Revenue Department (IRD) for relevant information for investors. 
• Shares and investing on the stock market:
  • Investing in shares provides an opportunity to own a portion of a company and participate in its growth, but this type of investment will also rise and fall in value based on any stock market movements.  You need to ensure that you’re comfortable with this and the investment matches your risk appetite.
  • You can use online platforms or brokerage services to buy and sell shares.  Keep up to date with market news, company performance and economic indicators to help you make informed investment decisions.
• Term deposit accounts:
  • These are generally higher interest accounts where you invest your money for a specified period of time with an agreed interest rate.
  • These accounts can be helpful when you don’t need access to your money for the period of time its invested. 
• Managed investments: 
  • According to MoneySmart, these are investments “where your money is pooled together with other investors. A fund manager then buys and sells assets, such as cash, shares, bonds and listed property trusts, on your behalf.”

Government sources and references:

For comprehensive and reliable information, there are a number of trusted sources you may want to review, including:

• Australia: 
  • Australian Taxation Office: offers detailed information on superannuation contributions, taxation and investment rules.
  • MoneySmart:  offers information to help you take control of your money with tools, tips and guidance to manage your day to day and future investments. 
• New Zealand:
  • Inland Revenue Department (IRD): offering resources to help you with taxation, investments, KiwiSaver, just to name a few.
  • Financial Markets Authority (FMA):  who regulate financial markets and offer resources on investing, to make sure investors can make informed choices.

Seeking professional advice:

While this article aims to provide valuable insights, it is crucial to recognise that individual circumstances vary. If you’re uncertain about the appropriate investment strategy, seek advice from a qualified financial adviser. A professional can tailor recommendations based on your financial goals, risk tolerance and overall situation.  

Conclusion:

Balancing contributions to your superannuation or Kiwisaver with other investments can pave the way for a more secure financial future. Property investing, shares and other alternatives offer diverse opportunities for wealth accumulation. Referencing additional information from trusted sources can help ensure your investment decisions align with your investment goals, providing a better foundation for financial success. Remember, seeking advice from financial experts is a prudent step for personalised guidance in navigating the complex world of investments.