Managing Wealth in Retirement: Navigating Credit, Kids, and Capital Gains

As retirement approaches—or if you’re already there—it’s natural to start asking sharper questions about how your money is working for you. Perhaps you're exploring more reliable income options, aiming to support children or grandchildren, or seeking ways to manage investment tax outcomes. These are important priorities, and there are compliant strategies that may assist you in navigating each.

This article explores three common retirement considerations: the role of private credit ETFs for income, options for investing for younger generations, and whether to transfer shares into your super before retiring.

1. Can Retirees Use Private Credit for Income?

Private credit ETFs have become more visible in recent years due to their relatively high yields—often advertised in the range of 8–9%. These funds typically lend to non-bank borrowers, meaning they carry higher risk, including default and liquidity risk.

While attractive on the surface, these investments are not guaranteed, not government-backed, and are generally more complex than traditional term deposits or government bonds. They also tend to be less transparent and slower to access during market downturns, which may heighten risks for retirees relying on capital access.

Regulatory note: Private credit investments must be assessed against the product’s Target Market Determination (TMD). Advisers are obligated to determine whether the investment is appropriate for the client and cannot rely solely on the client’s preference.

A measured approach is essential. While some product issuers suggest a 30% portfolio allocation ceiling for their target market, many retirees may be better served by capping exposure much lower (e.g., 10% or less), ideally diversified across managers to reduce concentration risk.

Before considering this asset class, it’s critical to understand:

• Who manages the fund?

• What types of loans are included?

• How are defaults handled?

Importantly, this is general information only and does not consider your personal financial objectives, needs, or circumstances. Speak to a licensed financial adviser before making any investment decision.

2. What’s the Best Way to Invest for Children or Grandchildren?

Supporting the next generation is a common goal for retirees. How you structure that support can impact tax treatment, control, and succession planning.

Option 1: Account in your name
One straightforward approach is to open an investment account in your own name and mentally earmark it for a child or grandchild. This avoids the punitive tax rates applied to children’s unearned income (up to 66% above $416/year). It also retains control in your hands—helpful if plans or circumstances change.

Option 2: Investment bonds
Investment bonds may suit high-income earners. These are tax-paid vehicles (maximum 30%) that can be withdrawn tax-free after 10 years, provided certain conditions are met. They allow beneficiary nominations and are sometimes used in estate planning. Keep in mind they can have higher fees and be less accessible than regular investment platforms.

Option 3: Superannuation as a legacy tool
If you're still working and in your 50s, superannuation can potentially serve as a wealth transfer tool. For example, contributing additional funds to super and nominating adult children as beneficiaries may allow assets to grow tax-free and transfer efficiently upon death. However, death benefit tax may apply to non-dependent beneficiaries, and super laws—including contribution caps—must be observed.

Caution: Any contributions or strategies involving children and super must be in line with the sole purpose test and your retirement objectives.

3. Should I Transfer Shares into Super Before Retiring?

Superannuation is often the most tax-effective environment for Australians in retirement. Once over age 60 and in pension phase, both earnings and withdrawals are generally tax-free. This can make it attractive to move shares into super—but there are some important constraints.

1. Contribution limits apply

• Concessional (before-tax): $30,000 per year

• Non-concessional (after-tax): $120,000 per year, or up to $360,000 using the bring-forward rule (subject to your total super balance)

2. CGT consequences
Transferring shares into super typically involves selling them (unless you're using an SMSF and contributing in-specie). This can trigger capital gains tax (CGT), particularly if the assets have appreciated.

3. Timing matters
If you're near retirement and expect your taxable income to fall, delaying the sale until you're in a lower tax bracket may reduce CGT. Strategically using capital losses may also help offset gains.

Where clients use an SMSF, contributions of in-specie listed shares must comply with the SMSF’s investment strategy and deed. Related-party transactions must also be at market value and supported by documentation.

Note: Using gearing inside super via an LRBA structure to acquire shares or property carries additional compliance obligations, including ensuring the client’s risk profile and cash flow can sustain it.

Final Thoughts

Good retirement planning balances income needs, tax outcomes, and legacy goals—while avoiding avoidable risks. Whether you’re looking at credit-based income, investing for future generations, or reshaping your investment structure, the following principles apply:

• Private credit: High yield doesn’t mean low risk. Proceed with caution and only if it aligns with your risk profile and income needs.

• Investing for family: Maintain control, minimise tax, and structure your generosity thoughtfully.

• Super strategies: Be aware of contribution limits and tax timing—especially around share transfers.

Compliance reminder: If you are relying on advice to make financial decisions, ensure that your adviser has provided a written Statement of Advice (SoA) where required. For minor changes to existing strategies, a Record of Advice (RoA) may be appropriate if the advice is not significantly different and your circumstances have not materially changed.

Disclaimer: The information above is general in nature and does not consider your personal financial objectives, situation, or needs. Laws and thresholds mentioned are current as at the time of writing but may change. You should seek advice from a qualified financial adviser before acting on any information or strategy in this article.