TTR - An Acronym Worth Knowing About
Jamie McIntyre - February 28, 2016
There are so many acronyms when it comes to financial planning that sometimes I get confused myself. It’s no surprise that most Australians still don’t fully understand how our industry operates or where Financial Planners add value.
Of all the acronyms, ‘TTR’ is one that you should definitely make yourself familiar with, especially if you’re looking forward to winding down your career sooner rather than later.
What is TTR?
TTR is otherwise known as ‘transition-to-retirement’, a financial planning strategy that allows you to access your superannuation while you keep working.
Previously, you could only access your super once you turned 65 or retired. This meant it was difficult to reduce your work hours and still maintain your standard of living.
What are the rules?
Under the transition to retirement rules, if you have reached your preservation age (see below), you may now be able to reduce your working hours without reducing your income. You can do this by topping up your part-time income with a regular 'income stream' from your super savings.
When can I access my super?
Generally, you can take your superannuation once you have:
- reached age 65, or reached your preservation age and retired from the workforce.
Your preservation age is the minimum age you can draw on your super and varies depending on when you were born.
Preservation age table
|Date of birth||Preservation age|
|Before 1 July 1960||55|
|1 July 1960 to 30 June 1961||56|
|1 July 1961 to 30 June 1962||57|
|1 July 1962 to 30 June 1963||58|
|1 July 1963 to 30 June 1964||59|
|1 July 1964 and onwards||60|
So what are the benefits of TTR?
There are a number of benefits associated with a TTR strategy, but primarily it can be broken down into two categories:
- Boost your super savings - your super balance will keep growing as your employer continues to make contributions into your super account. If you choose to salary sacrifice (stay tuned for next week’s blog on Salary Sacrifice) some of your pre-tax income into your super, you can further boost your super savings. This is because your salary sacrifice contributions are taxed at a lower rate when they go into your super.
- Pay less tax - you will enjoy generous tax concessions for both retirement income streams and super contributions. And when you turn 60, you won't pay any tax on your pension income.
Frequently asked questions
How much income do I need?
You will need to take into account all of 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 without having to replace the lost income.
Will the super pension affect my social security entitlements?
There may be implications for you or your partner's age pension and other entitlements.
How tax-effective is the arrangement?
This depends on many factors, which you need to address with a Financial Planner who specialises in TTR.
The good news
At MAC Financial we are experts in TTR. If you're approaching retirement or would like to find out more, please call us in the office if you have any questions about how TTR can help you.
Until next time,