If you don’t want to work until you are 65, but can’t afford to stop work early, the Australian government have put in place a scheme to help you work less, while still enjoying a good income. It’s called Transition to Retirement (TTR).

By implementing this strategy, as you near retirement you can increase your super balance (the fund put away for your retirement), without reducing your after-tax income. It works by giving you the opportunity to draw on your super fund to give you an income early while you carry on working and add extra contributions to the fund. You can also keep working the same hours but boost your super fund.

Once you have reached ‘preservation’ age – normally 55 years old – you can access your super benefits under certain rules. You cannot take your benefits as a lump sum while you continue to work, but you can take out regular payments if you choose to reduce your hours. Employers will also still need to make super guarantee contributions to their employees, even if you decide to take on TTR.

To be eligible you need to be between 55 and 65, be employed and transfer part or all of your super account balance into a retirement income account. You have two accounts; a super account, which receives your employer contributions, and your before tax contributions; and an income account, with some or all of your super savings, which provide regular payments to top up your earnings.

You boost your super fund through tax savings, as you can add extra to your super from your before tax salary, thus your taxable income is lower. You also receive income from a super pension. The before tax payments to your super fund plus the income payments from your pension are usually at a lower tax rate, allowing you to use these tax savings to further boost your super.

Transition to retirements strategies can be quite complex so it is worth discussing with a financial advisor or an accountant, who will advise if it is the right option for you.

There are several aspects to consider before setting this scheme, such as what type of fund you have, as this scheme is only available if you have an accumulation superfund. You also need to seriously consider whether you want to boost your upper or cut back on work, as the strategy is slightly different. Think about your income needs and all your sources of income. Check your social security entitlements, as this can have implications on your pension.

Also ensure you know the tax implications, and if your life insurance is tied in with your super fund, check that it will not change with this scheme.

There are many benefits to TTR, so make sure you discuss it fully with your financial advisor in order to get the best possible advice, and make the most of your money.

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