Case study transition to retirement part-time work
Susan reduces her work hours to transition
has just turned 60 and has a super balance of $160,000. She earns
$48,000 a year after tax.
Susan decides to only work 3 days a week so that she can
gradually ease into retirement. This means her income from work
will drop to around $32,000 a year after tax. Susan can afford
to reduce her take-home pay a little bit but can use her super to
soften the drop.
How will the strategy work?
Susan's adviser shows how she can have a take-home pay of
around $41,000 using her super.
- Susan transfers $155,000 of her super to an account-based
- She draws a pension of $9,000 each year, tax-free.
- Susan's take-home pay only drops by around $7,000 a year
- Her super continues to grow as she is still working
- She saves around $9,400 in tax each year
If Susan had retired, her super balance would be dropping by
large amounts each year.
Here are the adviser's calculations for the first year.
|TTR pension income
|Minus tax & Medicare Levy
|Take home pay
||(Take home pay drops a bit)
|Super contributions: employer contributions*
|Minus contributions tax
|Minus TTR pension drawdown
|Minus tax on earnings**
|Net gain in super
||(Super is still growing)
|Total tax paid
|COMBINED TAX SAVINGS
||(Large tax saving)
Susan is enjoying her extra days off, comfortable in the
knowledge that her super will continue to grow until she is ready
Tax on transition to retirement is changing
Investment returns on transition to retirement pension accounts
will be taxed from 1 July 2017. See the Australian Tax Office (ATO) website for
more information on the changes and how they will affect you.
Last updated: 18 Jan 2017