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As you approach retirement, you may decide that working long hours isn’t for you anymore. If this sounds like you, you’re not alone. According to the Australian Institute of Health and Welfare, 32% of workers aged 55–64 work part-time hours, while this figure jumps to 51% for those aged 65 and over.1
If you’re thinking about retiring but you’re not ready to give up work completely, a Transition to Retirement (TTR) strategy may be an option for you to consider. This strategy lets you access some of the money in your super to meet the shortfall between your old full-time earnings and your new part-time work. So how does a TTR strategy work? Here are some of the benefits:
1. Accessing super - At age 60, you can transfer some of your super into an account-based pension (TTR pension account) and start drawing a regular income from your TTR pension account while continuing to work part-time. This income could supplement your salary and help you adjust to a lower income level.
2. Tax benefits - Withdrawals from your super after age 60 are generally tax-free. This can help you manage your finances more efficiently during your transition. You might also have the option of making salary sacrifice contributions to your super, which will be taxed at the lower rate of 15% up to the $30,000 annual cap, including your employer paid super guarantee. Keep in mind that any investment earnings in your TTR pension account are also taxed at a maximum rate of 15%.
3. Increased flexibility - A TTR strategy could allow you to gradually scale back your work hours while still maintaining your current standard of living.
It’s important to note that with a TTR strategy you can’t access all of your super money. If you’re considering this strategy, keep in mind that a few rules apply, including:
• Each year, you must withdraw a minimum of 4% of your account balance, and only up to a maximum of 10% of your account balance.
• The balance of your super account is calculated at 1 July each financial year.
• You can’t make lump sum withdrawals – you can only receive pension payments (from a TTR pension account) up to your limit.
• Life insurance cover is not available through TTR pension accounts, but you can continue to hold or obtain life insurance through your super account.
TTR planning can be complex, so it may be worthwhile speaking to a financial adviser to determine whether this is right for you.
Visit Government website, moneysmart.gov.au for more information about a TTR strategy.
Important information
1Australian Institute of Health and Welfare, Older Australians, Employment and work, Table 9.2: Proportion of people employed full- and part-time by age group, 2021 https://www.aihw.gov.au/reports/older-people/older-australians/contents/employment-and-work
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