What are the potential benefits?

A TTR strategy may offer several benefits:

Greater flexibility: Rather than moving directly from full-time work to retirement, you can gradually transition at a pace that suits you.
Additional income: Regular payments from a TTR account can help support your cash flow if you're working fewer hours.
Continued investment exposure: Your super remains invested, giving your savings the opportunity to continue growing over the long term.
A chance to test retirement: Reducing your working hours can help you experience what retirement might look like before making the leap completely.

Things to consider

While a TTR strategy can be valuable, it's important to understand that it isn't right for everyone.

A TTR account involves decisions about:

how much of your super to transfer
how much income to draw each year
the impact on your retirement savings
your personal cash flow needs
tax and contribution rules.

Drawing too much from your super could reduce the amount available to support your retirement later in life.

That's why it's important to consider your broader retirement goals before putting a TTR strategy in place.

What happens when you fully retire?

Once you permanently retire or meet certain age-based conditions (usually reaching age 65), a TTR account can be converted into a standard retirement income account, often referred to as an account-based pension or ABP. Most super funds offer ABP accounts – Vanguard Super’s ABP account is known as SpendSmart.

Two other important things occur. First, the 10% cap on annual withdrawals is removed, so you can drawdown as much of your account balance as you like. Second, investment earnings are no longer taxed, meaning that your investment is completely tax-free.

Is a TTR strategy right for you?

A TTR strategy may be worth considering if you're:

approaching retirement and want to reduce your working hours
looking for additional income while continuing to work
seeking greater flexibility in the years before retirement
reviewing ways to maximise your retirement readiness.

Because everyone's financial situation is different, it's important to understand both the opportunities and trade-offs before making a decision.

In conclusion

Retirement doesn't have to happen all at once.

A TTR account can provide flexibility, helping you move towards retirement on your own terms while continuing to work and build financial confidence for the future.

Taking the time to understand how a TTR strategy works and how it fits into your broader retirement plan can help you make informed decisions as you prepare for the next stage of life.

Transition to Retirement (TTR): How a TTR strategy can help you ease into retirement