Retirement can be full of surprises
Get more out of your life with a hybrid approach to retirement. You’ve earned it, after all.
For most of us, the beginning of our career is all about meeting our basic needs. We work so we can provide food, shelter and education for ourselves and our family. To pay the bills, we might even take on jobs we don’t necessarily enjoy. But with age comes freedom. Perhaps the kids have left the nest. Hopefully, the mortgage is paid off. With a life spent building savings, we may have some wiggle room to switch up our priorities. The work we choose to do, can shift from being a pure necessity, to focus more on pleasure and satisfaction. Here’s a few ways you can make this switch a reality.
Transition to Retirement (TTR) - a hybrid approach to retirement
Everybody approaches retirement differently. Many Australians intend to work until age 65, some plan to work for longer, others retire earlier. And then there’s the hybrid option - the one that can give you the best of each world. As you near retirement age, leaving the workforce might not be your preference. You may want to continue to build your savings, or perhaps you are not quite ready to say goodbye to the mental stimulation and interaction that a fulfilling career offers. This is where a transition to retirement income stream can provide greater financial flexibility.
What is a TTR income stream?
A TTR income stream is a type of pension, recognised by the government that allows you to withdraw money from your super, even if you continue to work and receive an income from your own business or employer. To set up a TTR income stream or pension, you must have reached your preservation age. Depending on the year you were born, this will be between the ages of 55 and 60.
How does TTR work?
There a number of approaches you can use to fit in with your preparations for retirement.
The Income Booster
Top up your income to improve your current cash flow position. With this option, you can continue full time work and use your super to top up your take-home pay by starting a pension account and drawing down an income stream. This approach provides flexibility and will improve your pre-retirement cash flow in the short term, but it may start eating into your retirement savings over time.
The Lifestyle Booster
Ease yourself into retirement by working less for the same income. If you are interested in reducing your work hours, you can supplement your lost income using your super and maintain a comparable take-home pay. By moving your super into a pension account, you may save on tax and access extra income to top up your salary. As you are dipping into part of your super, it’s important to factor this in to your long term retirement plans.
The Super Booster
Save more super without cutting down your take-home pay. With this option, you can close your retirement savings gap by continuing full time work and making salary sacrifice contributions taxed at 15% instead of your individual income tax rate. You can then top up your reduced take-home pay with income from your TTR pension account.
For many, having access to these choices opens up a bright new chapter in their lives. Continuing a career in a full time or part time capacity, or branching out as a business owner to work on what you love - it might ultimately mean working a little longer, but this time it is on your own terms. Without having to worry about taking a big pay cut or limiting your lifestyle, you can finally have the time to explore your passions and interests.
Get the right advice
TTR strategies can be complicated. We suggest you seek financial advice around your circumstances and assess any potential tax implications before carrying out your retirement strategy. To discuss your options, book a complimentary advice appointment with the VISSF team on 1300 660 027 between 8am and 5pm (AEST).