Pros and cons of a transition to retirement strategy

With a transition to retirement income stream, you may be able to work less – such as part-time or on a casual basis – while still maintaining your current lifestyle. With this new-found free time, you could do more of the things you love, like spending time with your grandchildren or ticking adventures off your bucket list.

Whether you decide to take on volunteering or a mentor role, or simply choose to switch to a more stress-free, lower paid job at the end of your career, a TTR pension could help supplement your income.

You could use the extra income being drawn from your super to get ahead by paying off a debt, such as a credit card or car loan.

If you earn more than $37,000 a year, it could benefit you to salary sacrifice more of your before-tax salary into your super and supplement your pay with tax-effective payments.

Don't want to stop working just yet? A TTR strategy could help you grow your super in those last few critical years. Because you're still working, your superannuation balance will continue to receive contributions, which could help make all the difference to your lifestyle when you retire.

There are limits to how much you can tax-effectively contribute to your super, so make sure you understand the contribution caps.

With a TTR income stream, you must withdraw at least 4% of your account balance each year, and you can access a maximum of 10% (although the COVID-19 pandemic has led to exceptions for the 2019-20 and 2020-21 financial years). These restrictions mean that you need to consider how much of your super you transfer into your TTR account when you open it. You cannot withdraw a lump sum.

You need your savings to last throughout your entire retirement, so the earlier you start spending your super, the faster it's possible to empty your account. Before starting a TTR strategy, you should consider your retirement plan and calculate how long your super will need to last in retirement.