As you approach retirement, a Transition to Retirement (TTR) strategy can help you access your superannuation while still working, providing more flexibility in how you manage your finances. The main goal of a TTR strategy is to allow individuals over the age of 55 (or 60, depending on your preservation age) to draw a portion of their super through a pension while continuing to work, offering the opportunity to boost retirement savings or supplement income.
There are three main cashflow methods within a TTR strategy: negative, neutral, and positive cashflow. Each serves different financial goals and can be tailored to your needs.
- Negative Cashflow: This method is designed to increase your super balance while reducing your taxable income. You continue working full-time and sacrifice a larger portion of your pre-tax income into super through salary sacrifice. At the same time, you draw a small pension from your TTR account to supplement your reduced take-home pay. The result is lower taxable income and a boost to your retirement savings through concessional contributions.
- Neutral Cashflow: The neutral approach maintains your current take-home pay while still making additional super contributions and reducing your tax. You salary sacrifice a portion of your income into super and draw an equivalent amount from your TTR pension, keeping your overall cashflow the same but benefiting from tax savings and growing your super balance.
- Positive Cashflow: This option is for those looking to supplement their income. You reduce your work hours or continue working while drawing a larger portion from your TTR pension to make additional income. This allows you to boost cashflow for debt reduction or to meet large expenses while still contributing to your super.
Each method has its advantages depending on your personal circumstances. It’s important to seek professional financial advice to ensure your TTR strategy aligns with your long-term goals and tax situation.
