Why “Transition to Retirement” will benefit you greatly
What is “transition to retirement”?
Most working Australians have thought about superannuation at least once or twice. It seems like super and pensions are the main sources of income when one retires, however, now there’s a new player on the field - transition to retirement (TTR).
TTR is a government scheme that grants you both working and superannuation benefits simultaneously. You pay less tax than a full-time worker and you’re still allowed to work.
When you reach 55, the TTR scheme allows you to take some of your super and put it into a qualifying pension product. You can still work and contribute to your super while using the TTR.
You can use your super as a source of income while you sacrifice some of your wages into super. The pension product has an attractive 15% tax offset and will amplify your overall super balance through salary-sacrifice contributions and your employer superannuation guarantee. This provides a net benefit to your long term retirement.
If you feel like reducing your working hours before you retire, the TTR can accommodate for you. The super you withdraw can be used to supplement the hours you choose not to work. This way, you can slip into retirement at the pace you want.
TTR, by its very nature, is designed to be flexible. It allows flexibility in work-retirement arrangements. Those arrangements can change in nature from person to person so it can get a little confusing.
To avoid this confusion, seek professional advice. Spend some time with a financial adviser and talk about what options are available to you under the TTR.
There are several factors to ponder before you opt for the TTR pension:
- Review your fund classification. TTR funds can only be accessed by members that have an accumulation super fund. Defined benefit members can't get one.
- Choose your money needs. Collate all your sources of income and work out the amount you want to draw from your super.
- Keep an eye on your life insurance. Your life insurance could be at risk of reduction if you don't check with your current super fund to make sure it's all clear.
Keeping these tips in mind, TTR is something every Australian should consider.