What’s transitioning to retirement?
In a nutshell, transitioning to retirement is when you access your super in the form of regular payments while you’re still working.
If you have reached your preservation age, you have the option to:
- use your remaining years in the workforce to really boost your super by salary sacrificing more; or
- alternatively, cruise gently into retirement by cutting back your work hours.
In either case, your super is used to supplement your reduced income.
These strategies are known as a ‘transitioning to retirement’ (TTR), and they allow you to supplement your reduced income by allowing you to access some of your super.
You can only access your super as a 'non-commutable' income stream, which is just a fancy way of saying that you can’t take this as a lump sum, but rather as a regular payment stream.
You have flexibility regarding how much you’d like to receive (as long as your payments fall within the minimum and maximum amounts) as well as how often you’d like to be paid.
Maritime Super offers the Working Income Support Pension (WISP) as a way to transition to retirement. Learn more about the WISP by reading the PDS
Transitioning to retirement – how it works
There are different ways that you can use a transition-to-retirement pension:
1. Continue to work full-time and salary sacrifice more into your super to boost it, drawing on your WISP to supplement your reduced salary.
Advantage: you can continue to contribute and accumulate more super in the downhill stretch towards retirement. Better still, you can save on tax (especially if you are in a higher income tax bracket).
2. Cut back your work hours to ease gently into retirement, drawing on your WISP to supplement your reduced salary.
Advantage: you work less and enjoy life more without sacrificing your standard of living by using your super to supplement your reduced income.
In both scenarios, you can maintain the same standard of living by using a WISP to replace your reduced income.
Best of all, because you’re still working, you will continue to receive super contributions (you’ll just need to keep an accumulation super account so that you can continue to accept your employer’s contributions).
Tax benefits of a WISP
There are several opportunities for tax savings with a WISP:
- no tax is deducted when you transfer your super account to a WISP
- if you’re aged 55 to 59, your pension is in accumulation phase and is taxed at your marginal tax rate, but you may be entitled to a 15% tax offset
- if you’re aged 60 or over, your pension is in retirement phase and all pension payments are tax free
- investment earnings on a WISP in retirement phase are tax-free, and investment earnings on a WISP in accumulation phase are taxed at up to 15%.
Taxation can be confusing, so it’s important to get financial advice – for this reason, we recommend speaking with one of our financial planners.
Professional financial advice makes all the difference
If you’re unsure whether a TTR pension is for you, or you’d like some help implementing a TTR strategy, the best thing you can do is get some financial advice.
That’s because there are lots of things to consider, such as taxation and social security.
Our financial planners can also help you work out whether you’ll have enough for a comfortable retirement and give you strategies designed to make your money last so that your retirement is a worry-free one.
Meet with a financial planner to get advice on:
- transition to retirement strategies
- investing your pension
- budgeting in retirement
- tax minimisation strategies
- Age Pension and other social security entitlements
Call Member Services on 1800 757 607 to make an appointment with one of our planners.
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.