Episode 9: Transition to retirement – your guide to accessing your super while still at work

9 May 2023

While many people eagerly look forward to their golden years as a time to relax and enjoy life, the transition from work to retirement needs careful planning. In this episode, join Australia Retirement Trust’s Member Education Officer, Patrick Dunlop, and our host, Head of Advice and Guidance, Anne Fuchs, as they explore strategies you can use to transition to retirement that allow you to work less while continuing to grow your super.

Hello and welcome to Australian Retirement Trust's Super Insider podcast series. It's all about investments, the economy, and strategies to help make sure that you can maximise your hard-earned retirement savings.

Now, my name is Anne Fuchs, I'm head of Advice and Guidance at Australian Retirement Trust, and the team and I love providing help, guidance, and advice to our members so they can make the best possible choices for them. So, they can relax, put their feet up, and enjoy their retirement at the end of their working life.

Now, with me today is Patrick Dunlop, but before I introduce him, I will acknowledge that we're on Turrbal and Yuggera country and I'd like to pay my respects to Elders past, present, and emerging.

Now, Patrick is part of the Advice and Guidance team, which is very cool. It's good to have you here. He's been with Australian Retirement Trust for 13 years, was a Heritage QSuper person --

Yes, QSuper.

And spent so many years out on the road talking to members about all things superannuation, investments, retirement strategies. So, you are absolutely so welcome to our Super Insider Club, so we can get some knowledge out of your head. Because today we're talking retirement, transition to retirement.

[Patrick] Transition to retirement.

Indeed, we are. And look, I know there are lots of members thinking about whether this is a strategy that could be good for them. So, I'm excited to get into it. But before we do that, we have the good old general advice warning.

[Patrick] General advice warning.

Yes, yes, yes. So, off you go.

Sure. Before we jump in, I need to let everyone know that what we're going to talk about is general information only. Any advice doesn't take into account your personal situation. You should consider your circumstances and think about getting personal advice before acting on anything we discuss. You can also get a copy of our Product Disclosure Statement from our website, or by calling us on 13 11 84 if you have a Super Savings account or 1300 360 750 if you have a QSuper account.

[Anne] Beautiful, Patrick, and I have to say, you mentioned you were a radio --

[Patrick] Radio, back in the day, so many lifetimes ago back in Auckland, New Zealand, I was on a station that played hits of the seventies, eighties, and nineties and today.

Sounds like my type of station.

[Patrick] Yes, I think it's most people's type of station, if I'm honest, but I won't ...

We won't get ... Anyway, it's certainly great to have you on Super Insider. So many of our members get to a point, particularly members who are on their feet who have physical jobs, get to 60, late 50, 60, and just are quite frankly exhausted, and are crawling to the finish line. Where obviously other people, retirement's something they want to put off to never because they can sit and just work from their computer. So, with that context, are you able to explain, what are the rules around when you're allowed to retire?

So, once you reach something called your preservation age, which is a term I actually don't like - I, kind of, hate that. So, preservation or access age, as I like to call it, it's based on your date of birth. So, depending on when you were born, that determines when you can access your super. Once you reach your own personal preservation age, you can start to draw upon your super if you retire. But something else you can do for those people who may be thinking they're crawling towards their retirement is something called transition to retirement where you can continue working but you can start to draw down some of your super. And a big reason behind this was just to allow people to continue to work, to put in their expertise into their field. So, they still had that experience that their colleagues could draw upon, but they were still earning an income. So, these people might be able to potentially reduce their working hours, draw down some of their super, but maintain the same lifestyle. And that's really the main idea behind transition to retirement.

Which is kind of great if you want to surf more or look after an ageing parent, whatever it might be. But let's maybe go to some of the key ages. So, in terms of eligibility for the Age Pension, Patrick, what do our listeners need to know there?

Sure. So, one thing I do want to make clear, because a lot of people I speak to do get this conflated. But Age Pension access age and super access age are completely different. So, a lot of people don't realise that. Preservation age determines your super access eligibility, whereas the Age Pension requirements determine that. And for most people born after the 1st of January '57, their Age Pension access age would be 67, whereas for most Australians, their super access age would actually be 60. So, there's a bit of discrepancy there and, again, a lot of people don't realise that difference.

And what about this transition to retirement strategy that we're talking about today? What's the age access there?

Sure. So, again, have to meet your own personal preservation age. So, if you are born after the 1st of July 1964, your preservation age would be 60. So, once you hit 60, if you decide to continue to work, you don't need to do transition to retire, it's just an option available to you. But once you reach that age, you could set one up, you could start to draw upon some funds out of that account if you wish to maintain your lifestyle. Like I said before, maybe you've reduced your working hours, whatever it might be.

So, I'm still getting my take-home pay with the less hours, and then I'm getting an income. So, do I move out of my ... do I get a new super account set up and so I'm taking income and that complements my take-home pay?

Yes. So, basically while you're working you have your money that's receiving contribution from your employer and yourself, potentially. So, you'd have to move money out of that account into a separate standalone Transition to Retirement account. And from there, that's where you receive those payments. And you can typically ask to be paid, what sort of frequency you want. It's really up to you how you structure it. But the main thing is a lot of people, I think, still assume that you can effectively take all of your funds out of super; that isn't the case. There is a limit on what you can take, and it is capped at 10 per cent of whatever balance you move into that account.

But I think there's some really great things about transition to retirement, tax and also still seeing the investment earnings. So, maybe we should talk about those two components of why TTR is great for members to consider.

Sure. Especially if someone's preservation age was 60, once you reach the age of 60 any lump sum withdrawal, any income stream payment from super is 100 per cent tax free. And, I love telling my members, if you're over the age of 60 and your only source of income in retirement is from super, you never actually have to speak to the ATO. So, a lot of people love that.

[Anne Fuchs] Woohoo, yay!

Now, of course, a lot of people love that. But if you're still working, you start drawing upon - if you're 60, that would be tax-free. So, the best aspect of that is you probably don't have to take as much out of your TTR account to make up that shortfall of your income, because you don't have to account for the tax.

I think that's a really important point. And obviously that money then, too, it's still being invested, isn't it?

Of course, yes. So, in relation to that, you've still got investment choice. It's really up to you how you want that money to be invested. I've spoken to a lot of members who, while they were working, building up their super, they went a bit more aggressive to try to grow it. But when they moved some money into their Transition to Retirement, or TTR, account, they made it a bit more defensive. So, you can absolutely do that; it doesn't have to be the same investment approach. It's really your choice, but you still do have investment choice, which is important to know. There are some other products that super funds offer where you don't have that kind of choice. So, it's really important to understand TTR does offer that choice for you.

And if you're thinking about the right investment choice, we do have a podcast with Liz Kumaru, who's from one of our investment professionals, which gives a real deep dive into the different investment options. If you are listening to what Patrick's talking about and thinking, 'Okay, what would be the right thing for me?' So, how, is it easy, if you've got to the point you're working, you're winding down your hours, what is it about your personal situation then that makes you then think, 'All right. Well, TTR is no longer right. I need to just move into, say, Income, an Income account, or that type of thing'?

You can have a TTR account up to the age of 65. Once you hit 65, again, a lot of people don't realise this, but you then have full access to your super. So, even if you're still working, you've got 100 per cent access; you can take all of it out. So, once you hit 65, TTR doesn't apply, it's just a standard Income account. But to answer that question, I'd actually have to pose that question back to the person. So, I would say, 'Look, if you're thinking about completely winding up, what are you thinking of doing in your retirement? What is that going to look like? How much money do you require every year?' So, I ask these sorts of questions when I get asked about TTR just to try to determine what steps would be right for the person I'm speaking to.

And I think that's spot-on again, Patrick; everyone's situation is different. Are they retiring with a mortgage? Are they not? Which is why advice comes in. I do worry, though, a lot of members - I worry and I see the great work our team does talking to members about the risks of just pulling it all out and putting it in the bank. Or hiding it under the bed, even worse, and the impact that has in terms of the quality of people's retirement.

Absolutely. Again, when people come up to me and say, 'Look, do I need a TTR account?', my first question is, 'Do you need access to cash?' If their answer is, no, then it's probably not right for them. But if they say, 'Look, I do, because I'm reducing my hours', or 'Yes, I do, because I'm increasing my contributions in, which reduces my take-home pay', or 'I simply need to pay off my mortgage', I'd say to them, 'Look, TTR could be right for you.' But I always explain, just remember you could be potentially robbing from your future self to pay your current self. Is that the right move for you? And that, of course, is where advice and guidance comes in. So, if they do get to that level, 'Yes, I do need some access to cash', I'd say, 'Look, get some level advice just to make sure it is right for you.' But I've had a lot of people who come up to me to say, 'Look, I've been told I should do TTR. Should I do it?' And as soon as I ask that question, 'Do you need access to cash while you're working?', as soon as they say, ‘No’, it's not right. So, I always ask that question because, again, it really determines should they need that type of account or not. A lot of people are told that they need it and they probably don't in the long run.

I know members find this very daunting. There aren't high levels of financial literacy in Australia.

[Patrick] That's right.

And retirement is a very emotionally charged time. Just the pure emotions associated with the actual or perceived complexity of having to deal with super fund, income, potentially Centrelink, can be overwhelming. What are your reflections, Patrick, as someone who's spoken to members for 13 years about actually the wellbeing part for our members around that transitioning into retirement?

What I find is the people who do want to do a TTR account, a lot of them just want to keep working. So, for me, like, I always ask a question at my seminars, 'Who loves working?' I put my hand up because I've been doing this job for 12 years or 13 years, but 12 years in this role. And a lot of people just want to continue working. But what they realise is that by giving five days a week they're really not going to last much longer, and that could actually impact the quality of their retirement as well. So, with this TTR approach, it just does allow them to ease off the gas towards the end of their working career so they can slowly ease into that retirement. And for a lot of people that's the best way for them to maintain their lifestyle. And we do see a lot of people who maybe pull the pin immediately. They often feel maybe a bit disillusioned with retirement, not quite sure it's right for them, even jump back into work. But by winding down those hours slowly over a period of time, drawing upon their super, it gives them a ‘try before you buy’ type of approach. So, it's a really great approach if you're thinking of retirement but you're not entirely sure, or as I keep saying if you just need access to cash.

I know many members, they get to their sixties and they are either embarrassed or scared to look at their balance because they then are regretful, 'I wish I'd done more earlier. I wish I'd paid more attention earlier.' And I guess this is, it's like, I always use the sunscreen analogy: it's never too late to put on sunscreen. It's never too late to get your skin checked. And equally, too, the choices about how you make your retirement income last, there's obviously take more investment risk, work longer, pass away earlier. No-one wants to do that. So, therefore, this is an opportunity to extend --

[Patrick] That's right.

Extend that money, their contributions. So, it's a nice kind of middle ...

And the other thing, too, if they do decide to stop working, obviously no more income from their employer, no more contributions from their employer. Whereas by doing that TTR approach, still getting some income from their employer and contributions as well. So, it's a two-pronged approach. It really can help that super last the distance by simply still contributing to it for a few more years for them, absolutely.

Well, I know that you and the team are out in our regions. We have these webinars on YouTube. What's your favourite thing about your job, Patrick?

My favourite thing would be doing what we call our Member Directs, which are normally about 200 to 300 people. It's just because you actually see that instant reaction. I always love to tell a story of two couples I've met in my time in working for ART. And one couple I met retired with about $1.3 million. They had this approach in terms of what they were going to do. They were going to travel the world. One of their cruises they were going to do was $66,000 each. They were going to do all these sorts of things. And then I compare that to another couple I met who retired with $300,000. They were going to buy a caravan, travel around Australia. Very different approaches for retirement. Five years later I saw both of those couples again. The couple with $300,000 still had most of their balance, but that couple with $1.3 million had spent every cent. So, it really comes back to firstly advice and guidance, but really figuring out what your lifestyle is going to be. So, that's why I think a TTR approach can be really good for a lot of people, because it simply means your super is going to potentially last a lot longer, because you're still contributing to it and you're not drawing out of your super as much compared to someone who's fully retired.

Thank you so much for all you do and bringing that knowledge and passion here today to Super Insider. It's been wonderful having you on the program.

[Patrick] You're welcome. Thank you so much.

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This podcast is brought to you by Australian Retirement Trust Pty Ltd (ABN 88 010 720 840, AFSL No. 228975) the trustee for Australian Retirement Trust (ABN 60 905 115 063) (the Fund).