Paul Kinsella explains how the transition to retirement strategy works to reduce your tax and boost your retirement savings.
A Transition to Retirement (TTR) strategy can be a very powerful way to increase your super balance as you near retirement, without reducing your after-tax income. Effectively, you draw on your super to provide an income while continuing to work and making extra contributions to your super.
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To be eligible to commence a transition to retirement pension, you must first reach your preservation age. That is the minimum age you can access your super – currently 55 years of age for people born before 1960. The table below illustrates the preservation ages based on your date of birth.
Date of Birth
Before 1 July 1960
55 years old
01 July 1960 – 30 June 1961
56 years old
01 July 1961– 30 June 1962
57 years old
01 July 1962 – 30 June 1963
58 years old
01 July 1963 – 30 June 1964
59 years old
From 1 July 1964
60 years old
The transition to retirement strategy works by having two accounts:
Your superannuation account –to receive contributions from your employer and salary sacrifice contributions.
A new pension account –which is set up by transferring a portion of your accumulated superannuation benefits. This will enable you to receive a pension payment to supplement your income.
Commencing a Transition to retirement can provide you with the following benefits:
Maintain your current income when you reduce your hours of work. If you wish to reduce the hours you work, a Transition to Retirement pension enables you to supplement your part-time income.
Maximise your super. As you are still working you are able to make salary sacrifice contributions to your superannuation fund whilst using a transition to retirement pension.
Paul Kinsella discusses preparing for your retirement and the tax benefits of gradually transferring assets into super prior to your retirement.
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