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The three phases of super

Having a basic understanding the different phases that your superannuation goes through during your life can help when it comes to working out the tax treatment of an individual’s fund and any pension they take.

While not directly related, the overall investment strategy of a fund will also tend to change as the super transitions from one phase onto the next.

The lifecycle of superannuation can be divided into three phases; accumulation phase, transition to retirement phase and pension phase.

The accumulation phase is often the longest phase super goes through, running from when an individual starts work until they reach their 50s. The key during this phase, is to save and invest in as much as possible through contributions to super. Individuals can make concessional contributions, which are subject to an annual cap of $30,000 (or $35,000 for those over the age of 49) or non-concessional contributions, which are subject to an annual cap of $180,000.

Even though it is the shortest of the phases, the transition to retirement (TTR) phase is still quite important. A TTR typically starts when an individual turns 55, but individuals can also begin a TTR pension when they reach their preservation age. A TTR allows individuals to reduce their paid working hours (therefore, ‘transitioning into retirement’) and start taking money from their super.

The pension phase is when an individual has stopped accumulating and is now only withdrawing from their savings. The pension phase begins when an individual satisfies a ‘condition of release’. The main conditions of the release are:

Posted on 12 January '16 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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