How you can boost super and cut tax with a transition to retirement strategy

Could a small adjustment to your work-life balance help you boost your super and save on your tax bill? If you’re over 60, it might be possible with a transition to retirement strategy (TTR). As your countdown to retirement begins, making smart moves with your finances can ensure you’re set up to achieve both your immediate goals and long-term financial security.

At First Financial, we specialise in retirement planning, superannuation advice, and tax-effective strategies. A TTR offers numerous financial benefits, but it also provides emotional advantages as you transition gradually from full-time work to full-time freedom. Here’s what you need to know about this strategy for increasing superannuation and reducing tax liabilities.

A TTR strategy allows individuals who have reached preservation age (age 60) to access up to 10% of their superannuation balance each year while they continue working. This flexibility helps supplement income or adjust working hours as they transition into full retirement.

Gradually easing into retirement can reduce the financial stress often associated with stopping work abruptly. By maintaining partial employment and supplementing income with super, individuals can adapt their spending habits and retirement plans over time.

Over the age of 60, the TTR strategy offers added benefits, as superannuation withdrawals become tax-free at this stage. This provides a unique opportunity to use super as a financial tool, balancing income needs while boosting retirement savings.

Superannuation contributions made through salary sacrifice are taxed at 15% for those earning under $250,000 & 30% for those earning over, which is typically far lower than the marginal tax rate most workers pay on their salary. Redirecting part of your income into super reduces your taxable salary, creating immediate and measurable tax savings.

Once you reach 60, any withdrawals from your superannuation become tax-free. This is a key feature of the TTR strategy, allowing you to access your retirement savings to support your income needs without additional tax burdens.

By pairing concessional contributions with tax-free withdrawals, you can lower your total taxable income while still meeting your financial obligations and maintaining your lifestyle.

The concessional contribution cap sets an annual limit on the amount you can contribute to your superannuation from pre-tax income. This cap is currently $30,000. Salary sacrificing up to this amount can help individuals better manage their taxable income, especially if they’re nearing retirement.

Additional contributions to your super generate returns that grow over time. Compounding means that even modest increases in contributions can significantly impact your super balance as investment earnings accumulate year after year.

A TTR strategy can provide more than short-term benefits. By directing additional funds into super during the final years of work, you may be able to build a larger balance, potentially offering more financial security in retirement.

Each person’s financial situation is unique, and a TTR strategy may not be suitable for everyone. The strategy must align with your specific needs and goals, considering factors like income, expenses, super balance and desired retirement lifestyle. Seeking professional advice from a financial adviser can help ensure the right approach for your circumstances.

A successful TTR strategy involves carefully managing withdrawals from your super while continuing contributions. Striking the right balance helps maintain your lifestyle now without depleting retirement savings too quickly and supports the sustainable growth of your super.

As circumstances change, whether through shifts in income, personal priorities or legislation, your financial strategy should adapt accordingly. Regularly reviewing your approach with professional guidance ensures it stays aligned with your goals and continues to deliver the best possible outcomes.

If you’re over 60, approaching retirement, and looking to reduce your hours without impacting cash flow, a TTR strategy may be an option worth considering. An experienced financial adviser can help devise a plan that supports your immediate financial needs while continuing to build your savings.

A transition to retirement strategy can be a valuable part of your retirement plan, but it’s important to get it right and review it regularly. To explore whether this might be the right approach for you, get in touch with the First Financial team today.

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