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What is a transition to retirement strategy

Many people confuse a transition to retirement strategy with a Transition to Retirement Income account, and think that you can only implement the strategy between the ages of 60 to 64 in accordance with the rules of that product. But the truth is if you’re over the age of 65 and still working you can also use an account-based pension.  The strategy is independent of the product.

A transition to retirement (TTR) strategy is an approach for individuals aged 60 and older to access their superannuation while still working and use it in three different ways:

  1. Keep working and grow their super - keep working the same hours and put more money into super, while potentially paying less tax.
  2. Reduce their work hours – work fewer hours and use their super to top up their take-home pay.
  3. Get extra income from their super - keep working the same hours and use their super to generate an additional income stream.
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How a transition to retirement strategy works

To action the strategy, you’ll need to have: 

You’ll need a minimum of $25,000 to open a Transition to Retirement account with Equip Super. If your regular super account is also with Equip, you’ll need to leave a minimum of $6,000 in your account. 
 

There are several diversified and sector-specific options to choose from with Equip Super, take some time to explore what those options are. 

View investment options.

You can have your income paid to you on a fortnightly, monthly, quarterly, half-yearly, or annual basis, and you can choose how much you want to receive and when.

Learn about pension drawdown. Note that TTR accounts have limits on how much a person can draw down in income. 

 

Remember that as you’re still working, you, and your employer, can continue to make contributions to your super account and take advantage of the 15% superannuation tax rate through things such as salary sacrificing.

Make additional contributions.

An example of a TTR strategy

Brenda is aged 60 and plans to retire at 65.

She earns a gross salary of $85,000 per year, which equates to a take-home pay of $67,012 per year.

She currently has $350,000 in her super.

Brenda would like to boost her retirement savings but does not want to reduce her take-home pay.

Let’s look at how a transition to retirement strategy could be implemented for someone in Brenda’s situation.^

 Current positionUsing a TTR strategy
Gross salary$85,000$85,000
Salary sacrifice$0$20,225
TTR income payment (tax-free)$0$13,753
Less tax*-$17,988-$11,516
Net take home pay$67,012$67,012
Net superannuation**$8,309$11,747
Net financial benefit$0$3,438

Brenda’s transition to retirement strategy:

  • As Brenda is under the age of 65, she opens a Transition to Retirement Income account and transfers across $344,000 of her $350,000 super balance, leaving the remaining $6,000 in her super account.
  • Brenda salary sacrifices $20,225 to her super account, which reduces her take-home pay from her employer.
  • Brenda draws down $13,753 from her TTR Income account as a regular payment, which is this is tax-free and under the maximum 10% allowable.
  • She maintains her net take-home pay of $67,012 as the drop in income due to the salary sacrifice is supplemented by the TTR Income payment she is now receiving.
  • As a result of the strategy, Brenda has increased her net super position to $11,747 which provides her a net financial benefit of $3,438.

By implementing a TTR strategy Brenda has met her objective of boosting her retirements savings (an increase of $3,438) while maintaining her take-home pay of $67,012.

This approximate benefit is effective each year that she continues the strategy.

Why consider a TTR strategy

Everyone’s retirement journey looks different. Some people dive straight into a life of relaxation, while others dip their toes in first.

For those looking to ease into retirement on their own terms, implementing a transitioning to retirement strategy can be an empowering first step.

The ability to access your super before fully retiring means you can manage this shift on your own terms, enjoying a better work-life balance while still contributing to your super.

By accessing a portion of your superannuation, you can supplement your reduced take home pay with regular payments from your super. 

This strategy helps ease the transition into retirement without sacrificing your standard of living. It also offers flexibility for those who want to gradually phase out of full-time work. 

 

Accessing your super while still working can offer tax advantages. While drawing down part of your super you can salary sacrifice some of your work income into your account. The 15% tax you pay in superannuation may be lower than your own personal tax rate. This may help you boost your retirement savings while minimising taxable income.

 

You can boost your retirement savings by continuing to work the same hours but contributing more to your super. 

This strategy is particularly effective for those close to retirement who want to take advantage of the 15% tax rate on super contributions.​

Your retirement questions answered

A financial planner can take the guesswork out of retirement. Book a time for an initial conversation and we can help you map out your retirement goals, supporting services, and next steps. 

This initial appointment is obligation free and available to all fund members at no additional charge.

Book a time to talk to our advice team or call us on 1800 065 753

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Frequently asked questions

  • You must be over the age of 60 to access your superannuation and therefore set up a TTR strategy.
  • Income payments from your super are tax free. 
  • If using a TTR Income account, lump sum withdrawals are not allowed, only regular income payments. The minimum withdrawal is 4%, and the maximum is 10% of your account balance per financial year. 
  • A Retirement Income account (RIA) can be used for a transition to retirement strategy if you are aged 65 or older and still working. There are no limits on withdrawals and investment earnings are tax-free. 
  • You can continue your TTR strategy when your TTR Income account automatically converts to a RIA when you turn 65. 

 

It depends on your goals. By drawing from your super, a TTR strategy allows you to reduce working hours while maintaining income. It’s also effective if you want to maximise your retirement savings through salary sacrifice. If structured well, a TTR strategy can boost retirement savings and reduce personal income tax.​

 

A TTR Income account is available to those aged 60-64 who are still working. It allows access to your superannuation savings through regular drawdowns (income payments). There is no lump sum withdrawals allowed. You can only access between 4% and 10% of the balance each year.

A Retirement Income account is for those aged 65 and older, or those aged over 60 who have retired or changed employers since turning 60. It has no withdrawal limits, and the investment earnings are tax-free​.

 

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^Table assumptions
* Australian resident tax rates FY 2024-25 including Medicare Levy. Additional tax offsets may apply.
** SG 11.5% of gross salary. After superannuation contribution tax has been deducted.
Calculated 1 July 2024.
© 2023 Togethr Trustees Pty Ltd ABN 64 006 964 049 AFSL 246383 — *Past performance is not an indication of future performance.
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