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Pre-retirement Super Pension
Transition to Retirement strategy
A Transition to Retirement (TTR) strategy, is a way to reduce your work hours without reducing your take-home pay.
You can ease into retirement by working fewer hours, but you draw on your super through a Pre-retirement Super Pension to make up the difference.
A TTR strategy can be used two different ways.
1. Outcome: Less working hours, same pay
Wind back your working hours and top up your take-home pay with an income stream of TTR pension payments.
2. Outcome: Reduced taxable income
Salary sacrifice into super and supplement the reduced income with money from super pension payments.
Are you over 60?
The preservation age is the age at which you may be able to access your super either as a regular pension payment (including as a TTR) or by withdrawing a lump sum. This age has gradually been rising to 60 and is based on when you were born:
- on or after 1 July 1964 your preservation age is 60 years
- before 1 July 1964 you have already reached your preservation age
Even if you have reached your preservation age but are under age 65, you must meet a condition of release to access your super either as a pension or as a lump sum withdrawal.
Once you're aged 65, you can access your super regardless of your employment status and you don't have to meet any other condition of release.
Is transition to retirement a good idea?
This depends on your own unique circumstances, but people choose a TTR strategy for all sorts of reasons:
- to get a regular income
- to keep the rest of their super invested while they draw it down
- to reduce tax
- to stay connected to their workplace, while enjoying extra time for themselves
How does a transition to retirement pension work?
TTR can be complex, so let’s look a couple of examples.
For instance, let’s say you turn 60 and decide you want to retire, but not quite yet. So, you chat with your employer and agree that you’ll work just three days a week.
Obviously, your wage from that employer will be less. But the shortfall can be covered by accessing your super (as long as it’s sufficient) by setting up a TTR strategy with TWUSUPER and drawing on the Pre-retirement Super Pension.
Want to dig a little deeper? See our case study and worked example to find out how this could work for you.
Some things you need to know
There are rules around minimum and maximum withdrawals when you start a Pre-retirement Super Pension. See below for more detail.
Minimum pension payments
You must draw a minimum level of pension payments each financial year - the amount depends on your age and is recalculated on your balance at 1 July each year.
Note: During the first financial year of your account, the minimum payment is proportional to the number of days left until 30 June.
When you first open your account, and on 1 July each year thereafter, if you are aged... | The minimum amount of your account that must be drawn is... |
Under 65 | 4% |
65 to 74 | 5% |
75 to 79 | 6% |
80 to 84 | 7% |
85 to 89 | 9% |
90 to 94 | 11% |
95 or over | 14% |
Maximum pension payments
Generally, you cannot draw more than 10% of your account in any financial year unless you meet a condition of release. For the first year, the maximum limit is calculated at the date your account starts - you must also choose whether to receive:
- the maximum 10% amount, or
- some lesser amount being not less than the minimum amount.
Your maximum payment amount is then recalculated on 1 July each year.
Speak with a retirement specialist
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General advice on this website has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, consider its appropriateness. Refer to our Product Disclosure Statements (PDS). The PDS is relevant when deciding whether to acquire or hold a product. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at twusuper.com.au/tmd