Transition to Retirement (TTR) is a strategy that allows individuals who have reached preservation age or older to access their superannuation savings before permanently retiring. This strategy involves using a portion of your super to create an income stream, known as a retirement income account, while you are still working. By implementing a TTR strategy, you can boost your retirement savings, reduce your tax, or simply provide more flexibility in managing your income based on your individual requirements.

TTR eligibility

To be eligible for a TTR strategy, you must have reached your preservation age, which varies depending on your date of birth. The preservation age ranges from 55 to 60.

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 — 30 June 1961 56
1 July 1961 — 30 June 1962 57
1 July 1962 — 30 June 1963 58
1 July 1963 — 30 June 1964 59
After 30 June 1964 60

How a TTR strategy works

There are two ways in which a TTR strategy can work. First, you can choose to work less by reducing your work hours and supplementing your reduced salary with payments from your retirement income account. This allows you to maintain a similar level of income while working fewer hours. Secondly, you can choose to save more by salary sacrificing some of your income directly into your super. This can help you save on tax, and you can replace this amount through payments from your retirement income account, ensuring that your take-home pay remains the same.

Providing you with greater flexibility leading into retirement

Helps you to boost your retirement savings

Advantages to implementing a TTR strategy

There are several advantages and benefits to implementing a TTR strategy. Firstly, your income tax may reduce, as the tax rate applied to salary-sacrificed contributions entering a super fund is generally only 15%. This compares favourably to many personal marginal income tax rates and allows you to retain more funds for investment. Additionally, a TTR strategy provides the flexibility to vary the yearly income from your TTR pension within the prescribed limits. This means you can adjust your income based on your financial needs.

A TTR strategy can provide various opportunities for pre-retirees. It allows you to increase your income prior to retirement, reduce your hours of work while maintaining a similar level of income, reduce your tax payable, increase your retirement savings, and move your super assets into the pension phase when you meet a condition of release.

There are legislative conditions associated with a TTR strategy. You must have reached your preservation age, and the benefit must be taken as a non-commutable account-based pension, meaning no lump sum withdrawals are allowed. There are also limits on the amount of income you can draw from your super pension under this strategy, with a minimum standard drawdown rate of 4% and a maximum drawdown rate of 10% depending on your age.

Other things you should know

  • Prior to commencing a TTR pension, if you have made personal contributions to super for which you wish to claim a tax deduction, you must lodge your notice of intent to claim a deduction form with the superannuation fund (and wait for confirmation that they have received the notice).
  • If you are still working, you may need to retain an amount in your superannuation accumulation account to accept future contributions.
  • All contributions to super are preserved until a condition of release is met.
  • Drawing a pension prior to retirement reduces your superannuation balance at retirement if you do not offset this with sufficient contributions.
  • The commencement of a TTR pension does not count towards your transfer balance cap because this cap only applies for superannuation income streams where a tax exemption applies to investment earnings.
  • Investment earnings and capital gains within TTR pensions are taxed up to 15%.

A TTR strategy can be a beneficial option for pre-retirees who want to access their superannuation savings before permanently retiring. By implementing a TTR strategy, you can boost your retirement savings, reduce your tax, and provide more flexibility in managing your income. It is important to be aware of the legislative conditions and limits associated with a TTR strategy and to seek professional advice when setting one up.

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