Transition to Retirement
You’ve worked hard all your life, and now want to start enjoying the fruits of your labour. However going from working forty hour weeks to zero seems quite an extreme measure and something that your not quite ready for just yet. That’s where a Transition to retirement steps in.
What is a transition to retirement?
For many, reducing your working hours and income can put a big strain on your budget and cashflow. A transition to retirement allows you to keep working and still drawdown funds from your superannuation fund once you have reached your preservation age, giving you the ability to reduce your working hours without having to cut back your expenses. It can give you the ability to ease into retirement, without having to make large and abrupt changes to our life.
Wait, I can save tax with a Transition to Retirement as well?
Having a properly structured Transition to Retirement strategy can also save a heap of money on tax as well, even if you haven’t slowed down any of your working hours. Once you reach the age of 60, funds from superannuation can be withdrawn without incurring any tax at all. This can provide a handy opportunity for those that are still working and earning an income. By salary sacrificing additional funds to superannuation, they will be taxed at the superannuation tax rate of 15% (rather than your marginal rate of tax). You can then supplement the reduced income by salary sacrificing, from your superannuation Transition to Retirement, where the withdrawals are exempt from tax. By embarking on a strategy like this, you have effectively reduce your tax rate from your marginal rate, to a flat 15%. Careful consideration must be given however, to ensuring that you do not breach the maximum limits on concessional superannuation contributions and pension drawdown limits.
To find out if any of these strategies are right for you, feel free to reach out to 360 Financial, on 03 9427 0855.