As you approach retirement, it’s worthwhile thinking about what you want to do with your super.
The Australian Government has made it possible for you to keep working while drawing down some of your super benefits.
The policy, called transition to retirement (TTR), allows you to supplement your salary and maintain a comfortable lifestyle. This policy can be accessed if you’ve reached your preservation age (currently 56 years old) and are still working.
There are many reasons why people continue to work past preservation age. Some need the money. Others enjoy the mental stimulation and social interaction that a job offers. Some will reduce their working hours as a way to slowly ease into retirement.
There are several reasons why you may use a 'transition to retirement' (TTR) pension with two popular options being:
- Keep working full-time and boost super
- Reduce work hours and soften the drop in income
Before you set up a transition to retirement pension, you need to consider if this type of income stream is right for you and how it fits with your work and super plans. Here are some things you'll need to think about:
- Check your fund type - TTR pensions are only available for members of accumulation super funds. Members of defined benefit funds cannot access a TTR pension.
- Work out your retirement strategy - Do you want to cut back on work, pay off some debt before you retire or do you want to boost your super? Your answer will determine the approach you take.
- Decide on your income needs - Take into account all your income sources to work out how much money you should draw down from your super. Often people find their income needs reduce as they get closer to retirement and they can afford to salary sacrifice into super, or reduce work hours, without having to replace the lost income.
- Check your social security entitlements - If you or your partner are receiving social security benefits, speak to your financial adviser or a Department of Human Services' Financial Information Service (FIS) officer, as there may be implications for you or your partner's pension and other entitlements.
- Check the tax implications - This depends on many factors, so find out the tax implications for your situation from your financial adviser.
- Check on your life insurance - If you have life insurance with your super fund, check with the fund or your financial adviser to make sure your life cover does not reduce or cease.
Transition to retirement is a flexible option that allows you to work longer and retire later and rewards you for staying in the workforce. As it can be complex, we strongly suggest you discuss your options with your super fund and seek financial advice.
Why not schedule a meeting with Gerry or Clae now?
Information current as at 16 July 2015. The advice is general in nature only and does not take into consideration your financial situation, goals or needs. Before making any investment decision you should consider the appropriateness of the information to your circumstances and obtain a copy and read the Product Disclosure Statement. Please seek expert advice prior to acting on this information.