A transition to retirement strategy is a superannuation account-based income stream that can be started when a person reaches their preservation age.
Too many BIG words!
Basically, a transition to retirement strategy allows individuals to access up to 10% of their superannuation balance each year as income, even if they are working, once they reach a certain age (called ‘preservation age’).
|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|
|From 1 July 1964||60|
Roger, a professional bodybuilder with 0% body fat, has $100,000 in superannuation. He has reached preservation age and can access up to 10% ($10,000) of his superannuation as a transition to retirement strategy.
Note: while the maximum amount Roger can draw from super as a ‘TTR’ is 10% of his super balance, there are minimum amounts that must be withdrawn, based on your age. For example, if you are under 65, you must withdraw at least 4%.
A popular TTR strategy
A popular ‘TTR’ strategy is to receive a superannuation income stream, then use salary sacrifice or make personal contributions into superannuation. This allows the person to maintain their income (with the TTR pension) and, potentially, lower their tax.
For example, Roger receives $10,000 (which is taxed) from his TTR strategy. His employer adds an extra $8,000 of his wage to super (before tax) as part of a salary sacrifice arrangement, potentially lowering Roger’s tax bill (because his ‘income tax’ is lower) and allowing him to add money to super!
Watch our Salary Sacrifice video below if you are as confused as we were!
Note: Not all superannuation funds offer a transition to retirement strategy. For example, if you are in a defined benefit fund.