As you near retirement age, you may be getting itchy to cut back your working hours and spend more time exploring the Hunter Valley vineyards, or simply enjoying a better work-life balance in Newcastle’s & the Central Coast’s beautiful beaches. The good news? You don’t have to give up on your income to do just that.
A Transition to Retirement Income Stream (TTRIS) lets you top up part-time work with regular payments from your superannuation. For those with higher incomes, it can also be a smart way to cut taxes while boosting your retirement savings.
While the rules around eligibility, tax and Age Pension implications can seem pretty complicated, this guide will walk you through the nuts and bolts. And when you’re ready to explore whether a TTRIS is right for your situation, our team of Newcastle-based experts is here to help guide you every step of the way.
10 Steps to Setting Up Your Transition to Retirement
1. Check if you’re eligible to go ahead with a TTRIS
You’ll need to have reached your ‘preservation age’ to start drawing on your super while still working. If you were born after 30 June 1964, that’s 60 years old. And yes, that does mean you can keep on working while accessing your super fund.
2. Work out your strategy
What’s your top priority? If you’re looking to dial back your hours but keep your current lifestyle, a TTRIS can help bridge the income gap. On the other hand, if your taxable income falls between $45,000 and $250,000, you might be able to use a TTRIS to make additional super contributions at 15% tax – potentially saving thousands each year on your tax bill.
3. Get your head around how payments work
When you start drawing on a TTRIS, a chunk of your super moves from your accumulation account into a pension account, and then you get regular payments – usually between 4% (your age determines the minimum, depending) and 10% of your pension balance each year.
4. Understand the tax implications
Once you’re 60 and eligible for a TTRIS, your pension payments are generally tax-free. But earnings within your pension account are taxed at 15%. And then there’s the tax treatment when you turn 65 or fully retire – usually in your favour.
5. Consider other important factors that might come into play
- Employer contributions: Your accumulation account will still need to be open so you can receive super guarantee contributions from your employer – these can’t go into pension accounts.
- Insurance cover: If you have life insurance in your super, make sure you leave enough in your accumulation account to cover the premiums.
- Government benefits: A TTRIS might affect your Age Pension entitlements, or those of your partner, so it’s worth doing some research to see what impact it might have.
6. Get in touch with your super fund
Each fund handles TTRIS differently, so reach out for the lowdown on application forms, identification requirements, minimum balances, and fees. If you’ve got a self-managed super fund (SMSF), you’ll also need to make sure you’re meeting all the trustee and record-keeping obligations.
7. Decide on payments
Work out how much you want to withdraw each year – between 4% and 10% of your pension balance – and then choose a payment frequency that suits your cash flow needs – maybe monthly, quarterly or another schedule.
8. Fill out and submit the application form
Get your fund’s application form in order and provide all the required identification and proof of eligibility. Once you’re approved, funds will transfer from your accumulation account to your new pension account, and payments can start rolling in.
9. Keep records up to snuff
Save a copy of your application, pension account statements and your annual tax statements – you’ll need them for your tax return. And if you’re an SMSF trustee, you’ll have some extra record-keeping requirements to be aware of.
10. Review regularly
A TTRIS isn’t a one-and-done deal – your financial situation will change over time as you age, and when you fully retire, you’ll need to convert your TTRIS into a standard account-based pension. Regular reviews will ensure you’re on track with your strategy.
What This Means for You
For a lot of people in the Central Coast, Newcastle and Hunter region approaching their 60s, a TTRIS can be a great way to wind down into retirement. Whether you want to spend more time with grandkids, pursue some hobbies or simply not have to deal with the daily grind any more, accessing your super a bit earlier, while still building it up, can make that transition way smoother.
Of course, it’s not the right choice for everyone. There are some trade-offs to think about – potential impacts on your super’s long-term growth, changes to Age Pension entitlements, and tax implications that can vary a lot depending on your individual circumstances.
Let’s Talk About Your Options
Working out whether a TTRIS is for you requires looking at the whole picture – your income, super balance, retirement goals and broader financial situation. Our team has helped heaps of families navigate these decisions with confidence.
If you’re curious about how a transition to retirement strategy might play out for you, we’d love to have a conversation about it. Give us a shout to set up a consultation, and we can explore the possibilities.
General Advice Warning: The stuff in this article is just general info – it doesn’t take your personal circumstances into account in the slightest. Before you go making any big decisions about your cash, you really should have a chinwag with a qualified financial adviser.
For more information, have a look at: moneysmart.gov.au
