The transition into retirement can be seamless, if you plan properly and make use of the financial tools available. A transition to retirement can give you a greater balance in life. It could mean less work and more play, or help you save for retirement at a faster rate.
Transition to retirement (TTR) works by opening a retirement income account, using a portion of your super balance, alongside your regular super account. These two accounts work together and may reduce the overall tax you pay while helping grow your super savings.
A common misconception is that TTR only benefits those with very large superannuation balances, but this isn’t always the case. If you have more than $25,000 in superannuation, you can open an income account.
If your employer allows salary sacrifice, you could divert some of your salary into your superannuation and use payments from your income account to replace any reduced take-home pay, so you can still maintain your lifestyle. It’s important to remember for TTR to be effective; the tax you pay on your salary sacrifice super contributions should be less than the tax you pay on your salary (your marginal tax rate).
This strategy may save you tax, and provide a much-welcome boost to your retirement fund. The benefits of a TTR strategy aren’t just financial. Depending on your circumstances, you may be able to work fewer hours and give yourself a feel for what it’s like to have more time on your hands. It’s also a good opportunity to make a career switch or drop to part-time hours which is perhaps more sustainable over your remaining years at work or to try working in a field that has been of particular interest. And, if you’ve dreamed of a tree change or sea change, this is as good a time as any to give it a go.
When you can access your superannuation to start your transition to retirement depends on your preservation age. This can be anywhere between 55 and 60 years of age depending on the year you were born. There are also annual limits as to the minimum and maximum you can draw down from your income account, which also depend on your age.
To ensure you get the right balance and to find out if TTR will work for you, you should seek qualified financial advice. If you would like to learn more about the benefits of a transition to retirement strategy, visit AustralianSuper and find out how you can take advantage of your super and plan for the future.
Visit www.australiansuper.com/56matters to start your transition to retirement or call 1300 300 273 to speak to AustralianSuper today
This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, the Trustee of AustralianSuper ABN 65 714 394 898The views expressed are those of YourLifeChoices and not necessarily the views of AustralianSuper. The article contains general information and you should consider if it is right for you.
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