Transition to Retirement (TTR) pension accounts are a tool that can help you maximise your retirement savings while potentially scaling back your work hours. 

If you’re starting to think about retirement, they can provide an important first step. So here’s what you need to know.   

What is a TRP account?  

According to ABS data, half a million people in Australia intend to retire within five years. Setting yourself up to retire, planning ahead and understanding your options is an important part of preparing to wind down from working.  

A TRP account is a strategy that allows you to start to draw down on your super, while you’re still in employment.  This means you can start to reduce your working hours, while supplementing your income.  

In practice, this enables you to withdraw income from your pension account to replace the income from a reduced working week.  

Alternatively, you can use it to boost your super as you approach retirement. Using a TRP account with salary sacrificing can be an effective way to quickly grow your super thanks to the available tax concessions.  This is something a financial planner can assist with. 

Tax and a Transition to Retirement Pension 

If you’re approaching retirement, you can move some of your super balance into a Transition to Retirement Pension (TRP) and start using it as an income stream.  

Because you’re supplementing your income with your super, you will no longer need quite as much cash from your actual income. This may allow you to salary sacrifice some of your normal wage into super.  

Here’s the clever part. Salary sacrifice contributions are taxed at only 15%. Which is often lower than your marginal tax rate, meaning you can pay less tax overall.  This means you’ll be in a stronger overall position due to the tax savings.  

Alternatively, the income stream from a TRP can also be used to cut back on your work hours (while mainting your income). So you might go down to only four-days per week and use your TRP income to supplement the difference.

The good news is one of our financial planners can help you set up a TRP. They can also show you exactly how it may impact your income, your super, and your long-term retirement plans.  

Is a TRP account for me? 

The great thing about a Transition to Retirement Pension (TRP) is the flexibility it offers. 

Whether you want to scale back your work hours (while maintaining your income) or would like to boost your super as you near retirement, it provides government approved methods to do so. 

It’s also easy to set up. Our financial planners can help you understand your options, showcase different scenarios, and help you make an informed decision.  

You can book an appointment with an Equip financial planner via the banner below.