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Transition To Retirement income account: advantages and disadvantages
For those wanting to ease into retirement at their own pace, a Transition to Retirement (TTR) Income account can give you both the freedom and flexibility to balance work and leisure.
Like everything in life, a TTR Income account comes with pros and cons. Both are worth considering before deciding to go down that path.
Check your eligibility
To be eligible for a Transition to Retirement (TTR) Income account, you must meet specific criteria:
Reach preservation age: Aged 60 to 64.
Still working: A TTR Income account is designed for those who are still working but wish to reduce their work hours or supplement their income while easing into retirement.
Retirement Centre support
Not sure where to begin? Our Retirement Centre can provide one-on-one support and answer the questions you might be too shy to ask. Our services are available to all.
Benefits of a TTR Income account
Maintain a regular income
By drawing on your super through a TTR Income account, you can maintain a steady flow of income while working less.
Save on your tax
If you’re aged 60 or older, any money you draw from your super savings is tax-free. Additionally, salary sacrificing into your regular super account while you continue to work allows you to minimise taxes.
Ease into retirement
If the thought of abruptly stopping work makes you feel uneasy, a TTR Income account is a great way to slow down your working life and gradually transition into retirement.
Disadvantages of a TTR Income account
While a Transition to Retirement Income account can be used to maintain your income and offers tax benefits, there are some disadvantages to consider before deciding
Reduced nest egg
Drawing from your super while still working could reduce your long-term retirement savings. This could leave you with a smaller nest egg when you fully retire.
Limits on withdrawal
You can only access up to 10% of your super balance per financial year by law. This might not provide you with enough income if you plan to rely heavily on your superannuation savings to supplement reduced work hours.
Additional fees apply
Maintaining your regular superannuation account and a TTR Income account will result in additional fees, as you’re using two accounts.
Is a Transition to Retirement Income account right for you?
It all depends on your circumstances and retirement goals.
A TTR Income account can be good option if you want to reduce work hours without a loss in income or take advantage of tax savings. However, it’s essential to consider the potential impact on your long-term super balance and access to government benefits.
If you are still unsure if a TTR Income account is right for you, our Retirement Centre team are here to answer any questions you might have.
Talk to a retirement expert
What does your pathway to retirement look like? Not sure where to start? We can help.
Whether you’ve got questions about your super balance, when you can retire, or what to do once you get there, our Retirement Centre is here to help with personalised one-on-one service, practical information, and general advice. We can help you:
- Understand your retirement options
- Connect you with financial planning services
- Help you open a retirement account
Call us on 1800 777 060 or book a time to speak to our team today.
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FAQs
A Transition to Retirement (TTR) Income account can be an excellent option for those looking to reduce work hours without losing income. It also offers potential tax savings and allows you to continue growing your super. However, it's essential to consider the impact on your long-term savings and seek personalised advice to ensure it suits your goals.
If you’re aged 60 or older, any money you draw from your super savings is tax-free. This means you’ll pay no tax on the income you receive from your TTR Income account. Any investment earnings, however, will still be taxed at 15%.
You can move your money back from a TTR Income account to a super account anytime. At age 65, your TTR Income account will automatically convert to a full Retirement Income account (RIA) - subject to the transfer balance cap. If you retire or change employers between 60 and 64, you can apply to move your TTR Income account to a full RIA.
Using a TTR Income account, you can withdraw between 4% and 10% of your super balance each financial year. These limits ensure you can access funds while preserving your super for full retirement.
The transfer balance cap limits the amount that can be transferred into an income stream. The limit for the 2024/2025 financial year is $1.9 milion.
Converting your super to a TTR Income account will not count towards the transfer balance cap. Only super that is converted to a Retirement Income account (RIA), including when your TTR Income account automatically converts to a RIA at age 65, counts towards the transfer balance cap.
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