Accessing Superannuation Early While Continuing to Work

For Australians, superannuation is a key asset, but many are confused about how and when they can access it, especially while still working. While accessing super early is generally diffcult due to government rules designed to prevent early depletion, there is a solution for individuals aged 60 and over who wish to keep working and need some fnancial fexibility.

The Basics: Preservation Age and Conditions of Release

Superannuation operates on the principle of helping Australians save for retirement, and to prevent early depletion, early access is restricted. Under normal circumstances, you cannot withdraw from your super until you reach your preservation age, which is 60 for everyone born after 1964. Withdrawals made after reaching 60 are tax-free, but between the ages of 60 and 65, you can only access your super under certain conditions:

• You must retire permanently.

• Alternatively, you can trigger a condition of release by resigning from any job (even if it’s not your main job).

This limited access presented challenges for people aged 60 to 65 who were looking to reduce working hours but still needed extra income from their super. The Transition to Retirement Pension (TTR) In 2005, the Howard government introduced a solution called the Transition to Retirement (TTR) pension. This allows people aged 60 and above to draw down a portion of their super while continuing to work and contribute to super at the same time. With a TTR, you can access between 4% and 10% of your superannuation balance annually. This allows you to supplement your income without fully retiring.

The TTR pension is also tax effcient. For example, the money you withdraw is tax-free, and the super contributions you make may attract only a 15% tax rate, signifcantly lower than most marginal tax rates. How a TTR Pension Could Work for You Consider someone aged

60 who earns $120,000 per year, receives $13,800 in employer super contributions, and has $500,000 in super savings. They could withdraw $16,000 tax-free from their super and contribute $16,200 back into super as a taxdeductible contribution. This would reduce their contributions tax to $2,430, while the tax deduction would be worth $5,184, leaving their super balance $2,954 better off. This strategy, known as an income swap, can help you make the most of the difference between your marginal tax rate and the superannuation tax rate.

Helping in Times of Financial Need

Even though super is meant for retirement, a TTR pension can be a fnancial lifeline for those who are 60+ and facing fnancial diffculties but want to continue working. For example, if someone with $400,000 in super is struggling to make mortgage payments or cover family emergencies, they can access 10% of their super balance, providing $40,000 tax-free in the frst year. This could help alleviate fnancial pressure until their situation stabilizes. Once the immediate fnancial need is resolved, they can either stop the TTR or use it to increase super contributions, boosting their retirement savings while maintaining take-home pay.

The Importance of

Professional Advice

Although superannuation rules have tightened over the years, strategies like TTR still offer signifcant benefts for those looking to manage cash fow while working. However, it’s essential to seek professional fnancial advice to navigate these options effectively and make the most of your super.

Understanding superannuation access rules can help you maximize your retirement savings, avoid unnecessary taxes, and stay fnancially fexible as you transition to retirement.