A transition to retirement strategy lets you access part of your super while you are still working, either to replace income lost from reducing hours, or to combine salary sacrifice with a TTR pension to grow your super faster while keeping your take-home pay roughly the same.
For Australians over 60, it is one of the most tax-efficient planning tools available in the final working years. Whether it is right for you depends on your balance, income, tax position and how close you actually are to stopping work.
This guide covers how TTR works in practice, the best strategies for people over 60, which super funds offer it, and when it makes sense versus when it does not.
What Is a Transition to Retirement Pension?
A TTR pension is an income stream you start from your super once you reach preservation age (60 for anyone born after 1 July 1964), while you are still working. Unlike a full retirement pension, it has an annual drawdown cap of 10% of your opening balance per financial year. There is also a minimum drawdown of 4%.
The key features:
- Draw 4% to 10% of your opening balance per year as tax-free income (from age 60)
- Earnings inside your TTR pension are taxed at 15%, not 0% as in full pension phase
- Your employer continues to pay super contributions into your accumulation account
- You cannot take lump sums from a TTR pension while you are still working
- The TTR converts to a full retirement pension once you genuinely retire or turn 65
Scott and Phil covered preservation age and the TTR rules directly in Episode 18 of the Wealthlab Podcast, including common misconceptions about when you can and cannot access super. Watch Episode 18 on YouTube.
The Two TTR Strategies That Actually Work Over 60
There are two distinct ways Australians over 60 use a TTR strategy. They have very different goals and very different financial profiles. Knowing which one applies to you is the first step.
Strategy 1: Reduce Hours Without Reducing Income
The most common use case. You are ready to work less, but dropping to three or four days a week means a significant income cut. A TTR pension fills the gap.
How it works in practice:
You are 62, earning $80,000 a year working five days a week. You want to drop to three days, which cuts your salary to $48,000. You start a TTR pension drawing $32,000 a year from your super to maintain your original income level. Your employer continues paying 11.5% super on your reduced $48,000 salary.
The TTR income is tax-free from age 60. The $32,000 you draw from super is not taxed at all. Your effective income is maintained, your work hours drop, and your super continues to receive contributions on your reduced salary.
The trade-off: your super balance is being drawn down, not grown. Earnings inside the TTR pension are taxed at 15%. This strategy buys lifestyle flexibility, not super growth.
When this makes sense: You have a reasonable super balance, are genuinely reducing hours, and want a bridge between full-time work and full retirement without a financial shock.
Strategy 2: Boost Super While Still Working Full-Time
The tax optimisation play. You continue working full-time but combine salary sacrifice with a TTR pension to reduce your income tax and grow your super faster simultaneously.
How it works in practice:
You are 61, earning $100,000 a year. Your marginal tax rate is 32.5%. You salary sacrifice $25,000 into super. That $25,000 is now taxed at 15% (concessional contribution rate) instead of 32.5%, saving you $4,375 in tax annually.
Your take-home pay drops by roughly $16,875 (the after-tax cost of the sacrifice). You start a TTR pension drawing $16,875 a year from your super balance to replace that drop. Your net cash position is unchanged. Your super grows faster because the salary sacrifice contribution goes in at 15% tax rather than your marginal rate.
The tax saving in this example: $4,375 a year, compounding year on year until you retire.
When this makes sense: You are still working full-time, have a meaningful super balance, are in a tax bracket of 32.5% or higher, and have at least one to two years left before you plan to fully retire.
When it does not make sense: If you are close to the concessional contributions cap of $30,000 per year (including your employer’s 11.5%), the salary sacrifice room is limited. If your balance is small, the administrative complexity and 15% earnings tax in TTR may not be worth it. If you plan to retire within a few months, the benefit may not outweigh the setup cost.
Which Super Funds Offer the Best TTR Options in Australia?
This is a question many people searching for TTR information want answered, and it is genuinely important. Not all super funds offer TTR pensions, and the quality of the product, fees in TTR phase, investment options available and minimum balance requirements vary significantly.
What to look for in a TTR product:
The three things that matter most when comparing TTR options across super funds are fees in TTR phase, investment options available inside the TTR pension, and minimum balance requirements.
Fees in TTR phase. Some funds charge more inside a TTR pension account than in their accumulation account. Administration fees, investment fees and any product-specific pension fees all reduce your effective return. On a $300,000 TTR balance, a 0.3% fee difference is $900 a year, which compounds over the life of the strategy.
Investment options. You want the same range of investment options inside your TTR pension as in your accumulation account. A TTR in a cash or conservative option at 60 gives you none of the long-term growth benefit. Most large industry funds offer the same investment menu in TTR as accumulation.
Minimum balance. Some funds require a minimum balance (often $10,000 to $20,000) to start a TTR pension. This is rarely a barrier at the balance levels where a TTR strategy makes financial sense.
Large industry funds (Australian Super, Hostplus, Aware Super, Rest, Hesta, Cbus, Sunsuper/Australian Retirement Trust) generally offer TTR pensions as a standard feature with the same investment menu available in accumulation. Their fee structures in TTR phase are generally competitive. Phil’s observation from Episode 22 of the Wealthlab Podcast applies here too: look at what the fund actually holds inside the option, not just the label. Watch Episode 22 here.
Retail funds (those operated by banks and wealth management firms) vary more widely. Some offer competitive TTR products with additional features like financial planning access. Others carry higher fee structures in pension phase. Comparison is worth doing before committing.
The most important step is to check with your current fund whether they offer a TTR pension, what the fees are in that product specifically (not accumulation), and what investment options are available. Moving funds for TTR is possible but involves paperwork and timing considerations.
TTR and Investment Options: What Belongs in a TTR Pension?
When you start a TTR pension, you choose how the balance inside it is invested. This is separate from your accumulation account investment option.
For the tax optimisation strategy (Strategy 2 above), many people use a conservative or income-focused option inside their TTR pension, since the goal is to generate regular drawdown income rather than long-term growth. The growth part of your retirement strategy stays in the accumulation account where it continues compounding.
For the reduced-hours strategy (Strategy 1), a more balanced approach is common, since the TTR balance is your primary income source and needs to last until full retirement.
What to avoid: putting your TTR balance in a cash or term deposit option at 15% tax when you could be drawing it down and reinvesting in more efficient structures. This is one of the areas where getting advice before setting up the TTR is genuinely valuable.
TTR and Approaching Retirement: How It Fits the Bigger Picture
For Australians over 60 approaching retirement, a TTR strategy is typically a bridge, not a long-term destination. Most people use it for one to five years before fully retiring. The moment you retire, notify your fund and the TTR converts to a full retirement pension, at which point earnings inside become tax-free (0% instead of 15%) and the 10% drawdown cap is lifted.
The broader investment picture for someone approaching retirement at this age includes:
- Inside super (accumulation or TTR): primary savings, growing at controlled tax rates, accessible from 60
- TTR pension income: tax-free bridge income while still working, supplementing reduced wages or replacing sacrificed salary
- Cash buffer outside super: one to two years of spending needs in a high-interest savings account for stability
- Age Pension from 67: government income floor supplementing super from that point
How a TTR fits depends heavily on your specific balance, income and tax position. The worked examples above are general illustrations. Individual outcomes will vary based on salary, super balance, contributions history and fund fees.
For the full passive income picture in retirement beyond TTR, the Wealthlab passive income in retirement article covers each income source and how they interact with the Age Pension.
The free Wealthlab super calculator helps model TTR scenarios based on your balance and drawdown needs.
When TTR Is Not Worth It
TTR is not a universal win. There are situations where the complexity and 15% earnings tax in TTR phase outweigh the benefit:
If you are retiring within a few months. The setup cost and tax drag of TTR for a short period is unlikely to justify the benefit. Simply retiring and converting to a full retirement pension is more efficient.
If your salary sacrifice room is very limited. If you are already close to the $30,000 concessional cap, the tax saving from additional salary sacrifice is small. The TTR adds administrative complexity for limited gain.
If your balance is under $100,000. The 15% earnings tax in TTR versus 0% in a full pension phase, combined with administrative complexity, generally does not stack up for smaller balances.
If your marginal tax rate is 19% or below. The tax saving on salary sacrifice at 15% versus 19% is only 4 cents per dollar. Not worth the complexity.
If you are very close to preservation age but not yet there. You cannot start a TTR pension until you have actually turned 60. Planning ahead is fine but the strategy cannot be activated early
FAQ: Transition to Retirement Strategies for Australians Over 60
What is the best transition to retirement strategy for people over 60 in Australia? It depends on your goal. If you want to reduce hours without losing income, draw a TTR pension to replace lost wages while working part-time. If you want to build super faster, combine salary sacrifice with a TTR pension to reduce tax while keeping take-home pay the same. The best strategy depends on your balance, income and how long you plan to keep working.
Which super funds offer the best TTR options in Australia? Most large industry funds (Australian Super, Hostplus, Aware Super, Rest, Australian Retirement Trust) offer competitive TTR pensions with low fees and full investment option access. The key variables to compare are fees in TTR phase (not accumulation), investment options available inside the TTR pension, and minimum balance requirements. Always check your current fund before switching.
What are the tax benefits of a TTR strategy in Australia? TTR pension payments are tax-free from age 60. Salary sacrifice contributions are taxed at 15% rather than your marginal rate (up to 47%), which can save thousands per year for higher income earners. Earnings inside the TTR pension are taxed at 15%, which is higher than the 0% in full retirement pension phase but significantly lower than personal income tax rates.
Can I still get employer super contributions while on a TTR pension? Yes. Your employer continues to pay the 11.5% Super Guarantee into your accumulation account while you draw income from your TTR pension. The two accounts operate separately.
What is the drawdown limit for a TTR pension? Between 4% and 10% of your opening balance per financial year. You cannot take lump sums from a TTR pension while still working. The limit lifts once you genuinely retire or turn 65.
What investment options work best inside a TTR pension? For the tax optimisation strategy, a balanced or income-focused option inside the TTR pension is common, with growth assets held in accumulation. For the reduced-hours strategy where the TTR is your primary income, a balanced option that generates regular distributions without excessive volatility suits most people. Avoid placing your TTR entirely in cash if the strategy runs for several years.
When does a TTR pension convert to a full retirement pension? When you retire permanently from the workforce (cease an employment arrangement with no intention to return to work of 10 or more hours per week) or when you turn 65. At that point, the 10% cap is lifted and earnings tax drops from 15% to 0%.
How does a TTR affect the Age Pension? Drawing down super through a TTR reduces your eventual super balance, which can improve Age Pension entitlements at 67. However, income drawn from a TTR pension may count under the Centrelink income test if you are assessed before pension age. The interaction between TTR drawdowns and future Age Pension eligibility is one of the reasons professional advice on TTR setup is worthwhile.
What to Do Next
A TTR strategy is worth examining seriously if you are over 60, still working, and have at least a year or two before you plan to fully retire. The tax saving from salary sacrifice combined with a TTR pension can be meaningful, and the ability to reduce hours without a financial shock is genuinely valuable.
Whether it is the right structure for your specific situation depends on your balance, income, tax rate and timeline. The super calculator helps model the numbers. For the full strategic picture, a conversation with the Wealthlab team covers the specifics in a way general articles cannot.
