How a Transition to Retirement Pension Works

James O'Reilly
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A TTR or Transition to Retirement allows you to access your super while continuing to work. Read through so you can confidently navigate your retirement options.

Are retirement plans on your mind, but you're hesitant to commit? A TTR or Transition to Retirement may enable you to access to your superannuation while continuing to work, allowing you to have more flexibility in these years. In this article we'll outline how a TTR strategy works, the key benefits and the pitfalls you'll want to avoid.

What is a Transition To Retirement (TTR)?

A Transition To Retirement (also called a Transition To Retirement Income Stream or TRIS ) is a superannuation strategy plan that lets you tap into your retirement savings while you're still in the workforce. It's designed for those who are approaching their retirement age and helps people to ease into retirement without fully stepping away from work.

A TTR strategy is a smart way to start enjoying your savings earlier and offer a balance between slowing down whilst continuing to earn a regular income.

How does a Transition To Retirement strategy work in Australia?

A Transition to Retirement strategy involves drawing down on your retirement savings as you near your planned retirement date. This is typically done by tapping into your superannuation through a Transition To Retirement Pension and receiving a steady income from it.

Why do Australians take a TTR strategy?

You can use a Transition to Retirement strategy to achieve several important goals. One would be to work fewer hours while still maintaining your income. Another goal you can aim for is to improve your cash flow for specific pre-retirement needs like paying off debts or taking extra holidays.

Another not-so-common, but still highly beneficial, goal is to improve your tax situation. In total, there may be more than one reason to adopt this approach.

What are the rules around transitioning into retirement?

Transitioning into retirement involves various important rules to ensure that people don't exhaust their superannuation too early.

From July 1, 2024, onwards, you will need to be 60 years old to establish a TTR Pension (at the time of writing you can set up a pension if you’re 59 years old, provided it’s established before June 30, 2024). This age is called your 'Preservation age'.

TTR payments must fall between 4% and 10% of your account balance annually, and lump sum withdrawals are generally not allowed. If you're starting a TTR pension halfway through the financial year you'll need to take the minimum pension payment on a pro-rata basis, unless your TTR pension is started on or after 1 June.

While income payments for those aged 60 or older are typically tax-free, income for those aged 55-59 is typically taxed at your marginal tax rate, less a 15% offset. However, the tax on pension income will not change. Seeking expert advice is recommended for tax-effective and successful retirement transition planning.

How does a TTR income stream work?

After you reach your Preservation Age and have established your TTR Pension, you can choose the level of income that you'd like to take from your superannuation fund and the frequency that you'd like. This decision is not limited to your working arrangements (you can continue to work full-time, part-time or on a casual basis).

The extra income taken from your TTR Pension can offer you more financial flexibility as you near your retirement age or if you'd like to make changes to your work routine. Just remember that there are rules governing the annual withdrawal cap and tax considerations to consider, so you should speak with a financial advisor beforehand.

Can I stop a TTR pension?

You can put the brakes on a Transition to Retirement (TTR) pension if it no longer suits your needs or if things change in your life. To do this, you'll need to notify your superannuation fund and commute your super money from a TTR Pension back into an 'Accumulation' account (which is very likely the type of account that you had beforehand).

Once your whole super balance returns to the accumulation phase, your ongoing payments from super will stop. There can be some tax implications when making this change, so again it's best to chat with a financial advisor before you make the change.

Pros and Cons of a Transition to Retirement

What are the different pros and cons of a TTR strategy? That will depend on your situation. Take a look at a few common cases below:

Using TTR to Reduce Your Work Hours


  • Keep those super contributions coming in – they'll fill the gap caused by your withdrawals, making sure your retirement savings stay on track.
  • Once you reach 60, your TTR pension payments become tax-free! If you're between 55 and 59, you'll still pay taxes like usual, but there's a 15% tax offset to take the edge off.
  • Think of it as testing the retirement waters—giving yourself the chance to ease in gradually. You've got the time to plan and enjoy your newfound leisure without diving in headfirst.


  • Tapping into your super too soon can put a dent in your retirement savings. Starting withdrawals early means there's less super balance waiting for you when it's time to fully retire.

Using TTR to Save on Taxes


  • Pump up your super – with a TTR pension, you can team it up with salary sacrificing to give your retirement fund a boost as you approach your retirement date.
  • You'll only pay a 15% tax on salary-sacrificed contributions, which is often less than your regular tax rate. That means more tax savings.
  • And if you're 60 or older, your TTR pension payments are tax-free.


  • It's crucial to make your savings last throughout your retirement years, so it's wise to think twice before tapping into your super too early. Before jumping into a TTR, take a good look at your own retirement savings plan to make sure your super stretches far enough.

Frequently Asked Questions (FAQs)

Is a Transition To Retirement a good idea?

It boils down to what fits best with your money plans. For plenty of people, it's a smart move – a retirement strategy where you can utilise your additional funds to improve your tax position, as well as reduce your hours on the work front.

Before making significant decisions, you should consider factors like your age, retirement savings, and the lifestyle you envision for your future. Getting some advice from a qualified financial adviser can help you make sense of it all and decide if a TTR strategy is the right next step for you.

How do I start a transition to retirement?

You're headed toward 'retirement ready' after you reach your preservation age. From this date it's time to explore the possibility of establishing a Transition To Retirement Pension and whether it will make a meaningful improvement in your finances.

This means reaching out to your super fund or financial advisor to chat about your current income and options. A good advisor will walk you through everything, from deciding how much of your super to shift into TTR Pension phase, to figuring out the payment schedule that fits your money goals and work setup.

How much can I withdraw in a Transition To Retirement Pension?

At least 4% of TTR Pension account balance needs to be made each year during a transition to retirement phase. But you are welcome to take up to 10% of your regular income out if you need more.

These withdrawal rules help you balance your finances as you gradually shift into retirement, ensuring you have the flexibility to manage your income according to your needs.

What are the disadvantages of the transition to retirement?

Diminishing your superannuation balance, uncertainty about self-funding retirement, and potential administrative complexities - especially for SMSF owners - can lead to widely varied financial outcomes between those who effectively use their pension and supporting incomes, and those who do not.

TTR payments can also affect your eligibility for government benefits. You might also have tax issues based on your age and income. Take time to think these through and maybe chat with a financial advisor to make sure transitioning to retirement fits your circumstances and money plans.

Is retirement transition tax-free?

No, retirement transition is not entirely tax-free but you're likely to enjoy tax-free pension payments if you're 60 years of age or beyond.

Even though a retirement pension may have certain tax-free components, it's important to be aware of the tax implications specific to your age and situation.

What are tax benefits for transition to retirement TTR?

The tax perks of transitioning to retirement, known as TTR, depend on your age. If you're 60 or above, your TTR pension payments are usually tax-free. Putting money into your super for TTR pension accounts can trim your taxable income, especially for higher earners.

What is an account-based pension?

An account-based pension is the optimal pension that you can obtain in the superannuation environment. You'll have tax-free withdrawals, no tax on earnings inside the super (provided that your balance is below some thresholds) and no limits on how much you can take each year.

There are stricter limits to qualify for an allocated pension, which we have unpacked in other articles previously.

Can investment earnings from a TTR be reinvested?

Yes, you can reinvest investment earnings from your Transition To Retirement Pension. Reinvesting those investment returns can help you continue to save money for retirement. However, think about speaking with a financial counsellor to be sure that your money is being reinvest optimally and in line with your retirement objectives.

What is salary sacrifice?

Salary sacrifice entails an arrangement between you and your employer to allocate a portion of your salary towards additional contributions to your superannuation fund, prior to taxation deductions. This can enable you to give your retirement savings an extra boost while reducing your personal tax bill each year. However, as with any financial decision, it is prudent to carefully weigh the advantages and disadvantages and consider seeking advice from a financial expert to ensure alignment with your individual circumstances.

Can I use salary sacrifice with a TTR strategy?

Combining salary sacrifice with a Transition to Retirement (TTR) strategy can significantly enhance the growth of your retirement funds. In simple terms, when you set aside a portion of your salary into your super before taxes, you're trimming down your personal income tax liability - all the while beefing up your retirement savings.

It can be a smart play if you want to bulk up your nest egg as you approach your retirement years. Just make sure you're clear on the limits for contributions and withdrawals and maybe chat with a financial adviser to make sure it fits your money goals and situation.

Final Thoughts

Transitioning to retirement opens doors to more financial flexibility and lifestyle choices. Though it might feel overwhelming initially, grasping the rules can help you take charge of your financial path. From accessing super while still on the job to smartly handling taxes, this strategy can smoothen your journey into retirement.

Seeking financial advice pros can be critical when navigating this transition and making the most of the benefits available. If you'd like to discuss how this strategy may suit you, please get in touch with us today for a free assessment (no commitments).

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