What Is the Transition to Retirement (TTR) Strategy? If you’re in your late 50s or early 60s and thinking about cutting back on work, you’ve probably heard of the Transition to Retirement (TTR) strategy.But what exactly is it and how does it help you?
A TTR strategy lets you access part of your superannuation while you’re still working, giving you more flexibility as you move into retirement. It’s one of Australia’s most practical tools for easing out of full-time work without sacrificing your lifestyle or income.
Let’s break it down in simple terms.
Understanding the Transition to Retirement (TTR) Strategy
The Transition to Retirement (TTR) strategy was introduced by the Australian Government to help people gradually move into retirement rather than stopping work altogether.
It allows eligible individuals to draw a regular income from their super through what’s called a TTR pension even if they haven’t fully retired.
This means you can:
- Reduce your working hours without losing income, or
- Keep working full-time while boosting your super savings through tax-effective contributions.
Essentially, it’s about having more control and balance during your final working years.
How Superannuation Works When You Retire
Who Can Use a TTR Strategy?
To start a TTR strategy, you must:
- Have reached your preservation age (currently 60 for anyone born after 1 July 1964), and
- Still be working in some capacity full-time, part-time, or casually.
You don’t have to retire to start a TTR pension. As long as you’ve reached preservation age, you can open a Transition to Retirement income stream with part of your super.
When Can I Actually Access My Superannuation (Super) in Australia?
How the TTR Strategy Works
Here’s the basic idea:
- You transfer some (or all) of your super balance into a TTR account-based pension.
- You begin receiving regular payments from this pension between 4% and 10% of your balance each year.
- You can continue working and receiving employer super contributions at the same time.
This gives you two income sources your work income and your TTR income which you can adjust based on your needs.
Two Common Ways People Use a TTR Strategy
A TTR strategy can be tailored to your situation, but there are two main ways Australians use it.
1. Reducing Work Without Reducing Income
If you’re ready to work fewer hours but don’t want to lose pay, a TTR pension can make up the difference.
For example:
- You cut back to 3 days per week.
- You start drawing a small income from your TTR pension to replace your lost wages.
- You maintain your current lifestyle while enjoying more free time.
2. Boosting Super While Still Working Full-Time
If you’re still working full-time and earning a good salary, a TTR strategy can help you save tax and grow your super faster.
You can:
- Salary sacrifice part of your pre-tax income into super (reducing your taxable income).
- Use your TTR pension to replace the income you sacrificed.
This combination helps increase your super balance while keeping your take-home pay roughly the same.
The Tax Benefits of a TTR Strategy
The TTR strategy is popular because of its tax efficiency.
- After age 60, your TTR pension payments are tax-free.
- Earnings inside your TTR pension are taxed at a maximum of 15% (compared to up to 47% in personal income tax).
- Salary sacrifice contributions are taxed at only 15% when they go into super, often much lower than your marginal tax rate.
Together, these advantages can make a meaningful difference in your retirement savings and cash flow.
Things to Consider Before Starting a TTR Strategy
While a Transition to Retirement plan offers flexibility, it’s not right for everyone. Before you start, it’s important to understand the trade-offs.
- Reduced investment earnings: Super in a TTR pension is taxed at 15% (unlike 0% for retirees who’ve fully retired).
- Withdrawal limits: You can withdraw no more than 10% of your balance each financial year while you’re still working.
- Complexity: Setting up the right mix of salary sacrifice and pension income requires careful planning.
- Impact on Age Pension: Drawing from super may affect your eligibility later if it reduces your balance too quickly.
That’s why it’s best to speak with a licensed financial adviser to ensure your TTR setup suits your long-term goals.
Can I Still Work After Accessing My Super?
Example: How a TTR Strategy Can Work in Practice
Let’s say you’re 60 years old, earning $90,000 per year, and you want to cut back to 4 days a week.
Without a TTR strategy, your income drops to around $72,000.
With a TTR pension, you draw $18,000 from your super each year bringing your total income back to its original level.
At the same time, your employer continues to pay super contributions, and your retirement savings remain invested and growing.
It’s a win-win for many Australians easing into retirement.
FAQs: What Is the Transition to Retirement (TTR) Strategy?
1. What does a transition to retirement strategy mean?
It’s a financial plan that lets you access part of your super after age 60 while still working. You can use it to reduce your hours, top up your income, or build extra super through tax savings.
2. Who is eligible for a TTR pension?
Anyone who has reached preservation age (60 or older) and is still working full-time, part-time, or casually can start a TTR pension.
3. How much can I withdraw under a TTR pension?
You can withdraw between 4% and 10% of your pension balance per financial year while you’re still working.
4. Is a TTR pension tax-free?
Yes, once you’re over 60, your TTR pension payments are tax-free. If you’re under 60, you may pay some tax, but you’ll usually receive a 15% tax offset.
5. Can I still get super contributions while on a TTR pension?
Yes. You’ll continue to receive employer contributions to your accumulation account while drawing income from your TTR pension.
So, what is the Transition to Retirement (TTR) strategy?
It’s a flexible way to bridge the gap between work and retirement, helping you control your income, reduce tax, and enjoy more freedom without giving up work completely.
Whether you want to slow down, save more, or simply prepare early, a TTR strategy can help you make the most of your final working years.
At Wealthlab, we help Australians design smart, tax-efficient retirement plans including personalised TTR strategies that align with your income, goals, and lifestyle.
Book a free consultation today to learn how a TTR plan could work for you.