Transition to Retirement (TTR) at 60: The Tax-Free Strategy to Boost Your Super

If you are aged 60 or over and still working, you are sitting on one of the most powerful financial advantages in the Australian tax system. At age 60, your superannuation effectively "unlocks," becoming a source of tax-free income even while you continue to earn a salary.

By implementing a Transition to Retirement (TTR) strategy, you can maintain your current lifestyle while supercharging your retirement savings, potentially adding $3,000 to $8,000 per year to your net wealth without working an extra minute.

How the TTR Strategy Works

The magic of this strategy lies in the "recycle" effect. You draw tax-free money out of your super to live on, which allows you to "sacrifice" more of your taxable salary back into your super fund.

1. Start a TTR Pension: You move a portion of your super into a "pension account." You must withdraw between 4% and 10% of this balance each year.

2. Access Tax-Free Cash: Because you are 60+, these pension payments are 100% tax-free and do not need to be declared as assessable income.

3. Maximise Salary Sacrifice: Use that tax-free pension income to replace the "gap" in your take-home pay created by increasing your salary sacrifice contributions.

4. The Result: You receive the same amount of money in your bank account each fortnight, but you pay significantly less income tax because more of your salary is being taxed at the flat 15% super rate instead of your higher marginal rate.

Is This Strategy Right for You?

This is an intermediate strategy specifically for Australians approaching the finish line of their careers. It is the "gold standard" for:

• Workers Aged 60–64: Once you hit 60, the tax-free status of withdrawals makes this incredibly efficient.

• Full-Time or Part-Time Employees: You don't need to reduce your hours to start a TTR; you can keep working full-time and simply use it as a tax-saving vehicle.

• Those Wanting to "Ease" Into Retirement: If you do want to work fewer days, a TTR pension can "top up" your reduced salary so your take-home pay stays the same.

Important Risks and Rules

While a TTR strategy is a "win-win" for many, the ATO and superannuation laws have strict boundaries you must respect:

• The 10% Ceiling: You cannot withdraw more than 10% of your TTR account balance in a single financial year. It is designed for income, not for taking out large lump sums to pay off a mortgage.

• Tax Within the Fund: While the income you receive is tax-free, the investment earnings inside a TTR pension account are still taxed at up to 15%. (Earnings only become 0% tax when you fully retire or turn 65).

• Minimum Drawdowns: You must take at least 4% of your balance every year. If you forget to take your minimum payment, the fund could lose its tax-favoured status.

• Employer Cooperation: You need to ensure your employer is set up to handle increased salary sacrifice amounts.

• Complexity: Balancing pension withdrawals with salary sacrifice limits requires precise calculation. If you exceed your concessional contribution cap (currently $30,000/year), you could face penalty tax.

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