Transition to retirement
A gradual move to retirement
The Australian Government has made it possible for you to keep
working while drawing down some of your super benefits. The policy,
called transition to retirement, allows you to supplement your
salary and maintain a comfortable lifestyle. You can also use the
policy to save tax and boost your super before you retire.
Making the transition to
There are two ways to use a 'transition to retirement' (TTR)
- Keep working full-time and boost super
- Reduce work hours and soften the drop in income
Once you hit preservation age
(55 for many people), you can draw down a pension from your super
even if you are still working. Use our super and pension age
calculator to work out when you can get your super and age
and pension age calculator
If you are under age 65 and still working, you can transfer the
sum of your super to a super pension and withdraw between
4% and 10% of your pension account balance each financial
year. You cannot withdraw money as a lump sum.
Most super funds offer a pension option, however if your
fund doesn't, you can open a pension account with a different
super fund. Before you do, consider seeking professional financial
Boost your super savings
Your super balance will keep growing as your employer continues
to make contributions into your super account. Salary sacrificing
some of your pre-tax income into your super will further boost your
Pay less tax
Employer contributions and salary sacrificed contributions
are taxed at a low rate when they go into super. This is
likely to be lower than your marginal tax
Investment returns on a super pension account are not taxed, and
when you turn 60, you won't pay any tax on your pension income.
Even if you are under age 60 you will get a tax rebate on your
Ease into retirement
If you want to reduce your work hours as a way of easing into
retirement, taking a TTR pension from your super fund can
supplement your employment income if it's not quite enough to
maintain your current lifestyle.
Things to consider
Before you set up a transition to retirement pension, you need
to consider if this type of income stream is right for you and how
it fits with your work and super plans. Here are some things you'll
need to think about:
- Check your fund type - TTR pensions are only
available for members of accumulation super
funds. Members of defined benefit
funds cannot access a TTR pension.
- Work out your retirement strategy - Do you
want to cut back on work or do you want to boost your super?
Your answer will determine the approach you take. Read our
study on transition to retirement boosting super and case
study on transition to retirement part-time work to see
how different people use different retirement
- Decide on your income needs - Take into
account all your income sources to work out how much money you
should draw down from your super. Often people find their income
needs reduce as they get closer to retirement and they can afford
to salary sacrifice into super, or reduce work hours, without
having to replace the lost income.
- Check your social security entitlements - If
you or your partner are receiving social security benefits, speak
to your financial adviser or a Department of Human Services' Financial Information
Service (FIS) officer, as there may be implications for
you or your partner's pension and other entitlements.
- Check the tax implications - This depends on
many factors, so find out the tax implications for your situation
from your financial adviser.
- Check on your life insurance - If you have
life insurance with your super fund, check with the fund
or your financial adviser to make sure your life
cover does not reduce or cease.
Transition to retirement is a flexible option
that allows you to work longer and retire later and rewards you for
staying in the workforce. As it can be complex, we strongly suggest
you discuss your options with your super fund and seek financial
Last updated: 17 Mar 2016