Not everyone wants to go from full-time work to retirement all at once. Maybe you want to reduce your workload while retaining your quality of life, or you're approaching retirement and want to make a last-minute boost to your super. In this case, a Rest transition to retirement strategy may be the middle ground you're looking for.
How a Transition to Retirement account works
Say you've reached your preservation age. You aren't quite ready to retire, but may not be up to working the same hours as before.
You may be eligible to open a Rest pension 'Transition to Retirement' (TTR) account. This flexible option means you can use your super to supplement your salary, or you can salary sacrifice towards super to save on tax.
You could scale back your work from five days a week to four while supplementing the fifth day's income from your super. This also allows you to continue to make both employer and voluntary super contributions as you go to further guarantee a comfortable retirement.
Alternatively, you may want to make more contributions to your super in your last years of work. With a TTR account, you can arrange with your employer to salary sacrifice more into super, while drawing from your super itself as a source of income. Because salary-sacrificed contributions and TTR withdrawals are taxed at a lower rate, you are improving your super balance without paying as much tax.
||Tip: This strategy works best for those over-60 and with a mid-high income (and thus more expendable income to place in their super).
Is a Rest Transition to Retirement account right for me?
A Rest TTR account may be suitable if you have reached your preservation and:
- Are still in the workforce
- Have existing super benefits
- Want to boost your super
- Are transitioning to retirement.
||Tip: You can only withdraw your super from a TTR account as income payments and not a lump sum.
The benefits of a Rest TTR account:
A Rest Transition to Retirement account can help reduce your workload, improve your quality of life and boost your pension. Even if you're working and earning less you are still withdrawing less super than if you had retired, without losing the independence that gainful employment brings.
Both employer contributions and salary sacrifice contributions are taxed at a lower rate. If you are aged 55-59, the taxable portion of your pension payments come with a 15%. If you’re over 60, pension payments are tax free (in most cases).
Restrictions on a Transition to Retirement account
Restrictions do apply on TTR accounts, as they are intended as a temporary strategy and not a permanent retirement plan.
A minimum and maximum withdrawal limit applies to how much you can withdraw from a Rest TTR account. Currently, the minimum annual withdrawal rate us 4% and the maximum is 10% of your total super balance.
||Tip: When you do retire, your Rest TTR account will convert into a Rest account-based pension. This also happens automatically once you have turned 65.
What to consider before opening a TTR fund
Some things you should consider
- How do you want to retire?: TTR accounts work best when you want to cut-back on work or save money on tax. Which strategy fits in to your overall plan?
- What are your income needs now? Some people might find their spending habits reduce later in life, and they can afford to salary sacrifice more into super without replacing the income. Others may realise they need more money and cannot afford to salary sacrifice as much.
- Do you receive centrelink payments?: Government benefits may be impacted by any super arrangement. Rest's advice team can help you find out if you will face a change in circumstances.
- Check on your life insurance: Rest insurance continues as long as you have funds in the account.
Rest's team of advisors can help you answer these questions and find a solution that fits you best. Get in touch to find out more.
This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, consider its appropriateness and the relevant PDS which is available at rest.com.au.
The cost of providing financial services is included in the fees as disclosed in the relevant PDS. Rest and the Fund do not charge additional fees or obtain commissions for the advice provided. Rest employees are paid a salary and do not receive commissions. They may receive a performance related bonus that takes into account the financial services provided. Super Investment Management Pty Limited, a wholly owned subsidiary of Rest, manages some of the Fund’s investments. Rest has no other relationships or associations with any related body corporate or product issuer that might reasonably be expected to influence Rest in providing financial services. For more information, contact us at rest.com.au/contact-us.
Issued by Retail Employees Superannuation Pty Limited ABN 39 001 987 739 (Rest), trustee of Retail Employees Superannuation Trust ABN 62 653 671 394 (Fund)