Can I access super at 60 and continue working?


Can I access super at 60 and continue working?

Watching my clients over the years, I came to the conclusion that the age of 60 has to be the best age of your life:

  • physically you are very active, and unless you have your personal health issues, and there is not much that can stop you,
  • emotionally, you appreciate real, important things in life, things that matter to your life, things with substance and meaning such as: family, friends, community. You want to discover the word, make a difference, help those that need your assistance – help your kids, be involved in your community, participate in charitable activities.
  • People at the age of 60 plus are some of the happiest people on the planet – now you know why I love my work; I am surrounded with happy people – all the time.
  • Financially you are at the prime of your financial position, so you might want to reduce working hours, or stop working altogether and start enjoying financial fruits of your life labour and have some fun.

But then a big question arrives, can I have access to my savings if I want to retire or partially retire now?

These days most people have majority of savings in superannuation – a beautiful financial nest egg build overtime with your employer contributions as well as your personal contributions if you made any. If you haven’t been contributing, it is not too late, as super has huge benefits, especially in retirement. Just watch series of my superannuation videos to find out about superannuation system in Australia, pros and cons, best ways to contribute and what to watch out for.

From those videos you learn how to put the money in, why you should do it and all the issues in between. And today we are talking about the other end of superannuation story – taking your money out.

I’ve already created an article: When can I access my super? that explains the main rules of accessing your super savings, but today I want to discuss in details how to do it, if you are of the age of 60, so you have reached your Preservation Age, but you want to just slow down working, and not fully retire yet.

Can you have access to your super in this situation since you have not met Conditions of Release?

A good news is that if pass the age of 60 and you wish to continue working, you can access your super by commencing a retirement income stream with your super money – this is when we can set up Transition to Retirement or so-called TTR.

What is TTR and how does it work?

The easiest way to explain is with an example:

Let’s assume you are 60, and your retirement savings in super amounts to $500,000.

Instead of keeping that $500,000 in a super account (accumulation phase), based on your age, you have reached your Preservation Age, which allows you to rollover the super balance to an income stream (retirement phase), and that income stream will start paying you an ongoing income.

When to use Transition to Retirement?

  • if you want to only work part-time, obviously your wages have reduced, therefore you can supplement your income from work with extra income paid from your TTR income stream or
  • If you want to continue working full time, while you want to boost your super and save on tax

Who is eligible for TTR?

If you have reached your Preservation Age and you are still working. Preservation age is between age of 55 – 60 depending on your date of birth.

An important note is that TTR will only work with your super from the accumulation fund and not a defined benefit fund. But just about 10% of Australians have a defined benefit, mostly public sector employees, so it should not be a problem for most.

How much can you draw from TTR pension?

You can decide on income anywhere between 4% and 10% of the TTR pension balance calculated on 1st July each financial year. Due to extension of reduction of the minimum income payments for another year, in 2021/22 the lowest level of income you can draw from TTR is actually not 4%, but as low as 2%.

Tax on TTR Retirement Income Stream

  • If you are 60 or older, your TTR pension payments are tax free.
  • If you are 55 to 59, your pension is taxed at your marginal tax rate, but you get a 15% tax offset.

Let’s look at two examples then:

1. Adrian is 60, he is a team leader in a factory with income of $80,000. This job is very demanding and pretty stressful; therefore Adrian wants to reduce work to part-time only and start enjoying time with the family and a bit of travel. His superannuation balance is $700,000 with the full income.

Adrian decides to reduce his working hours and drop income down to $50,000. Adrian can decide how much to roll-over from his super to a TTR pension to pay him extra required income. His decision is to top up the earned income with extra tax free income from his TTR pension of $10,000. As this is tax free income, and the level of tax paid on earned income has also decreased, the total is more than sufficient for Adrian’s living expenses.

So, Adrian is happy, the same level of income after tax, more free time to do what he wants.

2. Stacey is 60, working in management on 120,000. She wants to boost her super balance, as due to a nasty divorce, her super is not at the level it needs to be to provide for a comfortable retirement, but Stacey would like to reduce her tax at the same time. Her super balance is $350,000.

Stacey decides to rollover her super to TTR pension, draw 8%, which amounts to $28,000, which is a tax-free income and then make a salary sacrifice of maximum allowable amount of $27,500 for 2021/22 financial year.

  • By salary sacrificing $27,500, Stacey’s personal tax dropped by $8,938
  • She had to pay 15% contribution tax on $27,500, which is $4,125
  • Therefore, the total outcome is that Stacey managed to save a whopping $4,813 in tax

Stacey is very happy, not only her level of disposable income has not changed, but on the top of this, she saved almost $5K in tax.

If you are not sure what Salary Sacrifice is and its benefits, watch my video: Salary Sacrifice Australia – tips, traps & benefits.

So how do you like this strategy? Do you think you could implement it for your benefit? I recon this is one of the best super strategies for anyone working pass the age of 60.

Let’s review now:

Benefits of TTR:

  • you can enjoy less working hours with the same pay
  • you can reduce your tax
  • you can slowly prepare yourself for retirement – you can start planning for your upcoming retirement, not only from finance perspective but you can check how you enjoy this part-retirement, sort of “buy-before you buy” deal to decide if you are actually ready for this decision.

Negatives of TTR

  • If you start drawing down your super early, you will have less when you finally decide to fully retire, and in turn your retirement savings will not last as long as you might want. This is why, going over the calculators that show the expected lifespan of your super savings is so very important. Every year you should know what is the impact of your income withdrawals on the total of your savings and how long will that money support you.

So now I would like to ask you a question: How much tax are you able to save with this strategy?

If you are still unsure or would like to find out how to optimise your income, your super contributions while minimising your overall tax, I am just a click away.

Retirement is a journey not a destination, so you better be well prepared for the ride. 

Here is the article you might be interested in:

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement

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