Transition to retirement

With the ageing of the Australian population, the Australian Government is keen to encourage older workers to remain in the workforce. One avenue is the move towards more flexibility to enable a balance between work and retirement with the introduction of Transition to Retirement (TTR) income streams.

What is Transition to Retirement?

TTR income streams allow you to access your superannuation while you are still working. You must meet a number of conditions to be able to take advantage of a TTR income stream including:

  • You must have reached your preservation age. For people born before 1960, this will be age 55. Preservation gradually increases after this date, and for people born after 1 July 1964, your preservation age is 60.
  • Your TTR income stream will be non-commutable until you reach age 65 or retire from the workforce. This means you cannot access a lump sum from this income stream while it is in TTR mode.
  • Your income stream must pay you between 4% and a maximum of 10% of the account balance as income each year.

How can you use a TTR income stream?

TTR income streams form part of a number of financial planning strategies. Two of the more popular are:

  1. To maintain your income while reducing your working hours. A TTR income stream can be used to maintain your cash flow (income) if you choose to reduce the number of hours you work.
  2. To accelerate your super savings in the run up to retirement. If you plan to continue working, a TTR income stream can boost your cash flow (income), which will allow you to salary sacrifice a larger proportion of your salary than you may otherwise be able to afford to do. If you are able to utilise this strategy after age 60, it becomes even more effective as the income from your TTR income stream will be tax-free.

Commonwealth Super Scheme members (CSS): A special case

Members of the CSS scheme should be aware that their scheme offers special transition to retirement options. For more information, go to the CSS website to access the 'Transition to Retirement' factsheet.