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What is a transition to retirement strategy?

A transition to retirement (TTR) strategy is ideal for those Australians looking to ease into retirement by slowly reducing their working hours.

It is the kind of pre-retirement strategy that allows individuals to continue working while drawing down some of their superannuation benefits at the same time.

TTR uses a portion of an individual’s super to create an additional income stream (a retirement income account) while they are still working. The super account continues to receive contributions from the individual’s employer and any before-tax (salary sacrifice) contributions. The retirement income account uses some of the super savings to provide regular payments that top up the individual’s income.

Prior to the government introducing the TTR strategy, an individual could only access their super fund once they turned 65 or retired. Under the new TTR rules, an individual must be over the age of 55 and under the age of 65 to access the strategy.

The benefit of a TTR strategy is the fact that an individual can boost their superannuation savings while easing into retirement and pay less tax at the same time.

The investments in the super fund are free of CGT and earnings tax while an individual draws on their super, so a transition to retirement income stream provides some benefits beyond saving income tax.

Posted on 15 October '15 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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