How a transition to retirement strategy can apply
A transition to retirement strategy works when you combine a pension account with a superannuation contribution account which enables you to keep building your superannuation through regular contributions, while receiving regular income payments from your pension account.
Investment earnings and contributions are taxed at superannuation rates within the contribution account and earnings within your pension account are tax free. If you are over age 60, pension payments are also tax free.
If you are under 65 and not permanently retired, you are limited to an annual maximum withdrawal of 10% of your pension account balance as at 1 July.
See how it works for Bob, aged 55
Bob is 55 and wants to implement a transition to retirement strategy to maintain his take home pay and boost his super balance, without exceeding his concessional contribution limit. Bob’s current salary is $150,000.
Bob’s concessional (before-tax) contribution limit is $50,000. His employer contributes $13,500 per year to his superannuation, so he chooses to salary sacrifice $36,500, bringing the total amount to the maximum $50,000**. In combination with this salary sacrifice, he withdraws $27,195 from his pension. Using this strategy, Bob can maintain the same take home pay and create a net addition of $3,830 to his super, while remaining within his concessional contribution limit.
* Including Medicare levy
** Assumes no additional sources of concessional contributions such as employer contributions towards insurance premiums and fees.
***Assumes no tax-free portion and includes Medicare levy
See how it works for Jo, aged 60
Jo is 60 and wants to implement a transition to retirement strategy to maintain her take home pay and boost her super balance, without exceeding her concessional contribution limit. Jo’s current salary is $150,000.
Jo’s concessional (before-tax) contribution limit is $50,000. Her employer contributes $13,500 per year to her super, so she chooses to salary sacrifice $36,500, bringing her total concessional contribution to the maximum $50,000**. In combination with this salary sacrifice, she withdraws $20,532 from her pension. Using this strategy, Jo can maintain the same take home pay and create a net addition of $10,493 to her super, while remaining within her concessional contribution limit.
* Including Medicare levy
** Assumes no additional sources of concessional contributions such as employer contributions towards insurance premiums and fees.
More information?
If you’re over 55 and interested in finding out how you can benefit from a transition to retirement strategy, we have a range of helpful tools and information available.
If you would like more information or assistance with the transition to retirement calculator, please talk to your adviser, or call the Pension Helpline on 1800 300 353 or email: russellpension@russellsuper.com
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