Transition to retirement: Access your super while you keep working

A ‘transition to retirement’ (TTR) strategy lets you access some of your super and keep working.

Setting this up can be complicated, so contact your super fund or financial adviser for advice.

How transition to retirement work

If you’ve reached your preservation age (aged 60) and 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.

You 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

Starting a TTR pension may impact your or your partner’s government benefits. Speak to a Services Australia  Financial Information Service (FIS)  officer for more information.

Life insurance and TTR

You may 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 top up your income.

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.
• Ease into retirement  — You can start planning what you’ll do with your leisure time before you retire completely.
  

Cons

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

Case Study

Alisha reduces her work hours

Alisha has just turned 60 and currently earns $50,000 a year before tax. She decides to ease into retirement by reducing her work to three days a week. This means her income will drop to $30,000. Alisha transfers $155,000 of her super to a transition to retirement pension and withdraws $9,000 each year, tax-free. This replaces some of her lost pay.

Using TTR to save on tax

You can use a TTR pension to grow your super and pay less tax in the lead up to retirement.

This strategy works best if you are 60 or older and a mid to upper income earner. (The middle income was around $83,000 a year in 2024.)

Pros

• Boost your super  — A TTR pension can be used with salary sacrificing to top up your super as you approach retirement.
• Save tax  — You pay 15% tax on salary sacrificed contributions. This is likely to be lower than your marginal tax rate.
• Pay less tax on income  — If you are age 60 or older, your TTR pension payments are tax free.
  

Cons

• Complexity  — You may need to pay for financial advice to understand if this strategy is for you.
  

Case Study

Kyle reduces his tax

Kyle is 60 and earns $100,000 a year. He intends to keep working full-time for at least another five years. Kyle transfers $200,000 from his super to an account-based pension so he can start a TTR strategy.

He salary sacrifices into his super. This will reduce his income tax, but also his take-home pay. He tops up his income by withdrawing up to 10% of his TTR pension balance each year.

Plan your retirement

When you’re preparing to retire, having a plan can help you feel more confident as your life and priorities change. Start planning with a  retirement checklist.

Have a chat with us today to start planning for your retirement.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/retirement-income/transition-to-retirement
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