Every worker with a superannuation account has access to three “transition to retirement” (TTR) payments that allows you access to some of your super while you keep working.

But setting up a TTR can be complicated.

If you are interested, it’s best to contact your super fund or financial adviser for advice.

When can I access a transition to retirement payment?

If you’ve reached your preservation age and are still working, you can use a TTR strategy 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

You can start a TTR pension by transferring some of your super to an account-based pension.

There is the need to keep some money in your super account to continue to receive your employer’s compulsory contributions or any voluntary contributions you make.

Government benefits and TTR

However, setting up a TTR pension may impact your or your partner’s Government benefits. It’s important to speak to a Services Australia Financial Information Service (FIS) officer for more information.

Life insurance and TTR

Another point to consider is if you have life insurance with your super. Check if your cover reduces or stops if you start a TTR pension.

Using TTR to reduce work hours

If you want to reduce your work hours, a TTR strategy can also help to top up your income.

The pros

  • Continue to receive super contributions – this helps to replace the money you take out.
  • Pay less tax – if you are 60 or older, your TTR pension payments are tax free. If you are 55 to 59, your pension is taxed at your marginal tax rate, but you get a 15% tax offset.
  • Ease into retirement – you can start planning what you’ll do with your leisure time before you retire completely.

The cons

  • Affects retirement income — If you start drawing down your super early, you’ll have less money when you retire.

In short, you can use a TTR pension to grow your super and pay less tax in the lead up to retirement.

But this strategy tends to work best if you are 60 or older and a mid to upper income earner – seeking financial advice can help you decide if it is the right option for you.

The information provided is for general purposes only and not financial advice. Consult a professional before making financial decisions. Your decisions are at your own risk.