In simple terms, a Transitioning-To-Retirement (“TTR”) strategy is the ability to access funds from your superannuation (normally set aside for your retirement) while you are gainfully employed and provided you've reached your preservation age.
Preservation is a restriction that prevents a member from accessing superannuation benefits until retirement or until satisfying a condition of release.
Preservation age is at least 56 years of age from 1 July 2015, and can be up to 60 years of age. Anyone born before 1 July 1960, has a preservation age of 55 years.
With a TTR strategy, you have two accounts within your superannuation:
The core objective of a TTR strategy is to reduce the overall tax you pay on your take-home income and increase your super through these tax savings.
This strategy works in conjunction with Salary Sacrifice that allows you contribute extra to your super from your before-tax salary. At the same time you receive an income from a retirement income (pension) account to compensate for the reduction in your Salary.
Savings occur when the tax you pay on your Salary Sacrifice Contributions is less than the tax you pay on your Salary.
These tax savings that are turned into extra super. Further to this the current ruling is people who have turned 60 years of age receive from a retirement income account become tax-free.
Karen has just turned 55, her objective is to increase her super through salary sacrifice so she can pursue her hobby of traveling when she retires. Her current super balance is $150,000 and her annual salary is $60,000 a year.
After discussing the strategy with an “IIG Financial Planning” adviser she discovers that she could add around $21,000 to her retirement savings over ten years without affecting her overall cash flow.