A transition to retirement strategy lets you access some of your super before you turn 65 and while still working. This gives you more flexibility and control over how and when you retire. It can also help you boost your super balance in the last years before you stop working.

Superannuation Adviser Georgina said while many people have heard of a transition to retirement product, they’re surprised to find out it lets them access their super sooner.

‘People are excited when they discover they can potentially access some super while still working. Most think they can’t retire until 67, which is the minimum age to access the government aged pension. But super is different. To start accessing super, you only need to reach your preservation age, and for most people, that’s 60 years old.’

‘In fact, if you were born before 1 July 1964, you’ve already reached your preservation age and might be able to access some of your super right now.’

How a transition to retirement strategy works

A transition to retirement strategy involves accessing some of your super as an income stream before you stop working.

To get started, you transfer a portion of your super into a new Transition Pension account.

Now you have two accounts: your regular super account, where you continue to put any super you earn, and a Transition Pension account that you withdraw money from (super you’ve already saved up).

This additional income stream opens up many options for getting the most out of your super before you retire.

Choose your path

There are two common strategies. Which approach you choose will depend on your financial situation, lifestyle needs and retirement goals.

Strategy 1: Work fewer hours and use a Transition pension from your super to supplement your income

If you’re not ready to stop working but want more time to ease into retirement, you can use a transition to retirement account to supplement your current pay and reduce your work hours.

This strategy involves reducing your work hours but using your Transition Pension payments to boost your income. So, even though you’re working less, you could still take home the same amount each week.

This option gives you the freedom to dip your toes into retirement without sacrificing your current lifestyle. 

As a bonus, because you’re still working part-time, your super keeps growing too.

Georgina said this strategy is about letting people use their super to suit their needs.

‘Everyone’s different, so everyone will have a slightly different approach to retirement. Obviously, the earlier you access your super, the less you’ll have later. But that might not be an issue if you have a large super balance or if your priority is finding the right work/life balance for your lifestyle.’

‘It’s about using your super to fund the life you want.’

Strategy 2: Boost your super and keep the same take-home pay

Of course, not everyone is eager to dive into retirement as soon as possible.

If you’ve reached preservation age but want or need to keep working, you can use a Transition Pension to leverage super’s special tax rules to give your retirement savings a boost.

This strategy involves salary sacrificing more into super while supplementing your income with regular pension payments.

Because salary sacrifice contributions are taxed at only 15% (likely less than your marginal income tax rate) and pension payments are tax-free if you’re over 60, these additional contributions and subsequent tax savings can boost your balance.

This strategy can look complex on paper, but the results are straightforward: same work hours, same income, tax-savings and a boost to your super.

For Georgina, this approach is about getting the most out of your super before retiring.

‘Everyone wants to pay less tax, and salary sacrifice is one of the most tax-effective ways to grow your super. If you’re in a higher income bracket, this strategy can help you put more into super without reducing your take-home pay — all while paying less tax! So, your super is working harder, but you’re not.’

Getting the right advice

No matter your retirement approach, it’s important to understand your goals and find out which pension options will work for you.

The best way to do this is to get advice from the super experts.

‘As a super adviser, the most common question I get is, “Do I have enough?” explained Georgina. ‘Naturally, there’s a bit of anxiety around it because no one wants to feel financially stressed in retirement.’

‘My job is to sit down with members, listen to their needs, and assess their situation. Then I talk them through their options to find a solution to help them achieve the best retirement outcomes for their circumstances.’

As for transition to retirement strategies, Georgina says it’s all about finding the right fit for your situation.

‘Transition Pensions offer a lot of options and flexibility, but it’s important to make sure it’s right for you,’ she explained.

‘There are a lot of factors to consider, such as your income, overall super balance, contribution caps, and carry forward provisions. There’re also maximum and minimum limits to how much you can withdraw from a Transition Pension each year, which may limit its effectiveness in some situations. So, you should definitely get advice before proceeding.’

Thankfully, we have a team of qualified super advisers nationwide ready to help online, over the phone or in person. This advice comes at no additional cost — it’s all part of the Spirit Super service.

‘The best thing people can do is get in touch so we can discuss their needs,’ said Georgina. ‘This starts as a general discussion, but if you want to go ahead and get formal advice about your super, we can crunch the numbers and provide a Statement of advice that shows precisely how it works. Of course, we’ll also be there to talk you through the details.’

If the numbers add up and you decide to start a Transition Pension (or any other pension), our advisers can help with the paperwork too.

‘Absolutely,’ said Georgina. ‘We can help fill out all the forms to get things moving as quickly as possible. We’ll even send it to our in-house admin team to get the ball rolling.’