The great retirement transition explained
If you're over 60 and thinking about cutting back at work, a Transition to Retirement (TTR) strategy could help supplement your income with super – without fully retiring.
A little about Joel
Joel Atputharaj is the Director, Retirement Solutions at Russell Investments. A Fellow of the Institute of Actuaries, he helps members and clients navigate complex challenges and has worn many hats across the superannuation and consulting businesses. Joel currently leads a program of work aimed at making continuous improvements to Russell Investments’ offer for members approaching, at, or in retirement.
Having your superannuation pay you an income when you retire can be a source of great comfort in the lead up to retirement. But you may also be able to tap your superannuation as a tax-free income source in the lead up to retirement—even as you continue to work.
To use your super while still working, you’ll need to start a special superannuation pension called a Transition to Retirement (TTR) product.
The idea behind TTR products is that they allow people to ease into retirement by cutting back on working hours, replacing the salary they’re giving up by working less with an income stream drawn from their TTR account.
Super is generally available to you any time after you’ve reached what is known as your preservation age, which is 60 years.
Using a TTR product, you must withdraw between 4 and 10 per cent of your account balance each year. You can’t take a TTR payment as a lump sum1 – it must be through regular payments.
What’s more, generally, payments and withdrawals that you may make from your super after you’ve fully retired are tax free. The same applies to payments you receive from a TTR product—it’s tax free.
Save while you spend
While you’re working, your employer must make compulsory contributions into your super account. From July 1, 2025, these contributions are set at 12 per cent of your ordinary employment income. This includes ordinary hours at work, shift and casual loadings and various allowances and may include overtime payments. (From July 1, 2024 to June 30, 2025, the rate was 11.50 per cent).
Your employer needs to make payments that you’re entitled to even if you have a TTR product, so you will be topping up your balance even as you withdraw from your super.
Turbo-charge your balance
If you have the financial means, you may be able to use a TTR product and also make tax concessional contributions into your superannuation account. Making extra contributions allows you to add to super savings in a tax-effective way, potentially allowing you to direct thousands of extra dollars a year to super over and above what an employer may be contributing on your behalf.
Hear from a fellow member on how that could work:
Nicholas’ story: Easing into retirement with flexibility
Nicholas has spent more than 30 years in sales roles across the medical equipment industry, rarely taking a break. Like many, he focused on his career and made regular super contributions but hadn’t thought much about retirement.
“When you’re working full-time, dealing with travel and workplace demands, you never really stop to ask, ‘What’s next?’” he says.
Now 63, Nicholas recently began thinking more seriously about life after full-time work. A series of unexpected family costs—including a large tax bill, dental work, and wedding expenses—prompted him to seek advice from a Russell Investments retirement expert.
That conversation introduced him to the idea of a Transition to Retirement (TTR) strategy, which allows eligible members to access part of their super while still working.
“They laid it all out for me—retire now, or transition gradually. I didn’t realise I could keep working and draw an income from my super at the same time,” he says. “They explained I could withdraw up to 10 per cent a year, and that was a game-changer.”
With a TTR product, between 4 and 10 per cent of your super balance must be withdrawn each year, paid in regular instalments—not as a lump sum.
Nicholas now plans to work full-time for two more years while drawing down the full 10 per cent of his super each year. After that, he hopes to move into part-time relief teaching to supplement his income while enjoying more time for tennis and travel.
“At this stage of life, things can change quickly,” he says. “You don’t want to leave retirement planning too late.”
Conclusion
In a nutshell, a transition to retirement income stream approach to super is a unique way of boosting your super by contributing more of your taxable income from employment and, if you need it, swapping all or part of this income with tax-free super from a super pension.
Whether this strategy suits you will depend on your personal circumstances, such as your income level and age. In general, the best time to consider it is when you are above 60, when you want to give your super a pre-retirement savings boost, and you qualify for tax-free withdrawals from your super fund.
If you want to know more about this strategy, I suggest you read our fact sheet Ease yourself into retirement and also refer to the fact sheet on making a salary sacrifice contribution and what this involves.
Benefits of saving through super
Tax deductible contributions to super enjoy a 15 per cent tax rate, which allows you to invest 85 cents in every dollar you contribute. This low tax rate gives your savings a great start.
Investment earnings in super also enjoy a concessional tax rate of 15 per cent, allowing you to retain a large proportion of the money your super investments earn. The more investment earnings you retain, the greater the opportunity these amounts have to compound investment returns—where the earnings on your super generates more earnings, and so on.
1 If you’re over 65 or have met another condition of release that gives you full access to your superannuation balance – that is, you can make lump sum withdrawals with no maximum withdrawals limits.
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