Transition to Retirement Strategies Explained

When you start to plan for retirement, you will encounter what’s called a transition to retirement (TTR) strategy. A TTR is designed to streamline the move to retirement while you are still in employment.

So, what exactly is it? And is it suitable for everyone?

Here’s what you need to know about TTR strategy, including availability, benefits and risks, and when to seek financial advice – so you can plan for retirement with confidence.

What is an Australian super TTR strategy?

The Australian super TTR strategy is a government initiative designed as a bridge between your working life and retirement. 

Also sometimes referred to as a TTR pension or TRIS (transition to retirement income stream), the TTR is a ‘pre-retirement phase’. Previously, superannuation was available only once you turned 65, but this scheme allows you to access a portion of your super while you are still working. 

Under the TTR scheme, you move to part-time hours. In addition to your part-time wage, you receive a top-up income stream from your accumulated super savings. You need to set up a separate account within your fund, specifically for the TTR payments. A TTR can only be accessed as an income stream, not a lump sum.

Your employer is still obligated to make compulsory super guarantee contributions for your hours worked. During this phase, your earnings continue to be taxed at the current maximum rate of 15%. 

Suitability for a TTR

The Australian super TTR comes into play when you reach superannuation preservation age, which in most cases is 60 years old. It’s available if you opt to move to part-time hours.

A TTR is not available once you reach the retirement phase, which is when you turn 65, decide to fully retire or meet another condition, such as permanent incapacity. 

Not all superannuation funds offer TTR accounts, so you will need to check availability and specific rules with your provider. You generally need a minimum amount to start, which, depending on your fund, may be between $10,000 and $20,000. Funds also have rules on how much you can withdraw annually, which may be between 4% and 10% of the TTR account balance. 

You need to keep your original accumulation super account open with a minimum balance, which is usually around $6,000. Again, that will depend on your particular fund.

TTR benefits and risks

The TTR can be an attractive option for those who aren’t yet ready to retire, but who would like to cut back hours without a large drop in income. 

During this phase, your super savings will continue to grow. Both accumulation and TTR accounts remain invested, topped up by employer and any personal contributions. You will pay lower tax during this pre-retirement phase and may be able to retain your existing income protection and life insurance. You will need to pay fees on both accounts.

While accessing your super savings early has benefits, you don’t have the flexibility that comes with accessing your full balance at retirement.

Generally, when you open a TTR account, you choose to deposit a lump sum from your super savings, and you cannot add to it later. So, you need a clear picture of your financial position and preferred income stream between age 60 and retirement. You should consider your tax strategy, insurance and any potential implications on your future age pension.

Finally, opting for the TTR strategy also means a reduced nest egg once you fully retire. If your balance is currently lower than you would like, you may decide it makes more sense to continue working full time and growing that balance.

When professional advice matters

The Australian Tax Office recommends that you seek professional financial advice when you are considering any superannuation withdrawal options. 

Expert financial advice is important to ensure you have a clear understanding of your obligations, and how tax applies to your retirement, TTR or superannuation income streams.

At Newealth, we’ve been helping people transition to retirement for decades. It can be complex, which is why we take a holistic approach to financial planning. We provide tailored advice on retirement as well as investment strategies, personal insurance, succession planning and estate planning.

If you’re ready to speak to a Newealth financial adviser or about your retirement plan, we’d love to meet you. 

General Advice Warning:

The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
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