Transitioning into retirement

Planning for retirement transitions

Transitioning to retirement is a big change. Suddenly, you’ve gone from being entrenched in the workforce or other responsibilities to pondering the reality of entering that time of life you’ve worked hard to achieve. Your perception of what retirement might be can sometimes be very different from what you’ve planned and that’s why the transition phase is important. Whether you’re looking to push for a final boost in savings or push back on working more hours, gradually easing into retirement is a great option. Even if you’ve thought out your retirement path, it’s still an emotional time of change.

Retirement is a significant life change and it may take some work to adjust to this new era of your life. One way to ease into retirement is by gradually reducing your work days over time or by looking at flexible work arrangements. Ensuring you maintain a strong social network is imperative – look at community groups, volunteering, and regular social engagements with family and friends to support your mental wellbeing as you wind down from the workforce. It’s all about finding a sense of purpose when you take the leap.

Working less and saving more

Now that you’ve made the decision to transition to retirement, you’ll need to look at your income and savings as this period is key to ensuring your financially prepared for the day you say goodbye to the workforce for good and look forward to this new life stage.

This period is actually a great way to gradually reduce your work hours and ease into your new lifestyle. Talk to your employer about working part-time or look for other ways to keep working to your timeframe – rent a room, monetise your side hustle (for example, are you creative and make things to sell, handy with home repairs to help out time-poor executives, love to drive and can use your car as a taxi, or a hit with little kids and could work in child minding?) If you remain or take up some form of reduced working hours, you can still earn or contribute to super and make your nest egg go further.

Making sense of your super

Depending on your circumstances and meeting a condition of release, did you know it’s possible to start withdrawing your super while you’re working? After you’ve accessed your super, you may decide to return to work, and the good news is you can still access your super. However, super benefits from your job cannot usually be withdrawn until you meet a condition of release for those funds. For example, permanently retiring from the workforce after reaching preservation age, reaching age 65 or becoming totally and permanently disabled.

Six reasons to consider a TTR pension

A transition-to-retirement (TTR) pension is a flexible option for those who wish to access their super while still working.

  1. Supplement your salary and ease into retirement with a work/life balance
  2. Reduce work hours or salary sacrifice into super and save on tax
  3. Continue to receive super guarantee contributions from your employer
  4. Grow your super by continuing to make before-tax super contributions
  5. Pay less tax by making salary sacrifice contributions, plus pension payments are tax-free if you’re 60
  6. Roll your TTR pension back into your super accumulation account at any time

Remember, investment earnings will be taxed at 15%, income payments may be taxable if you are under age 60, you cannot withdraw a lump sum, and if you have life insurance with your super fund, check if it reduces or ceases. The most important consideration is whether your current and retirement lifestyle could be compromised.

Getting the advice tailored to you

A great financial partnership is integral at this stage. The relationship you have with your financial adviser can make all the difference. They can help you establish and make the most of a TTR Pension, work out how many hours you should work as you transition, and help you review your SMSF succession plan and estate plan.

Helpful resources