The Benefits of Transitioning to Retirement

People make use of Transition to Retirement for a variety of reasons. Chief among these are:

Flexible working option  

Many people approaching retirement choose to work for fewer hours and then use the income drawn from their accumulated superannuation funds to make up for the resulting reduction in income.

Extra income  

The extra income gained from accessing retirement funding can translate into a significant increase in your personal cash flow, especially if you continue to work full time. Funds that become available in this way can then either be reinvested or, with the necessary discretion, used to finance certain lifestyle goals.

Maximising retirement income 

Transition to Retirement can also be used to further increase the money available to you in retirement. This can be done by taking advantage of the tax and investment benefits that can be gained by starting a non-commutable income stream from your superannuation fund and then 'salary sacrificing? a part of your regular income back into your super. This means that the super fund can continue to grow at a healthy rate, despite the fact that you are already drawing a pension.

Tax saving potential

Depending on your marginal tax rate, there is potential to save on income tax by implementing a transition to retirement strategy. This is because you can salary sacrifice income into superannuation at the 15% superannuation rate rather than a marginal tax rate. You can then draw a pension which has preferential tax treatment to other forms of income. Investment earnings on funds in Pension phase are also tax free rather than the 15% tax rate.