Transition to Retirement: An Inner West Guide

Still Going In — But Not Forever

At some point, usually somewhere between 55 and 65, a thought surfaces that you can’t quite ignore.

You’re not ready to stop completely. But you’re not sure you want to keep going at full pace either. The commute that felt fine at 45 feels heavier at 58. The Sunday-night dread that you used to shrug off now lingers a bit longer. You love what you do — some of it, anyway — but the idea of having more time, more flexibility, more mornings that don’t start with an alarm… that idea is getting louder.

This is the zone that most retirement planning completely ignores. The gap between full-on working and full-on retired. And for a lot of Inner West professionals, it’s the most important financial decision they’ll make.

It’s called Transition to Retirement. And getting it right can mean the difference between leaving work on your terms and leaving work in a panic.

What Is a TTR Strategy, Actually?

A Transition to Retirement (TTR) strategy is a formal mechanism under Australian superannuation law that allows you to access your super — in the form of an income stream — while you’re still working, once you reach your preservation age.

Preservation age is currently 60 for anyone born after 30 June 1964. If you’re 60 or over and still employed, you can open a TTR income stream and start drawing an income from your super — without having to retire first.

On the surface, this sounds like a simple way to top up your salary while you reduce your hours. And it can be. But the mechanics matter, and the wrong setup can cost you significantly in tax.

The Classic TTR Play

Here’s how a standard TTR strategy typically works for an Inner West professional in their late 50s or early 60s:

You open a TTR income stream from your super and start drawing an income — anywhere from 4% to 10% of your balance per year.

Simultaneously, you salary sacrifice more into super — redirecting some of your employment income back into super at a lower tax rate (15% contributions tax, rather than your marginal rate of potentially 34.5% or higher).

The result: your take-home pay stays roughly the same, but more of your money is flowing through the tax-effective environment of super. You’re essentially using the TTR income stream to replace what you’re salary sacrificing in.

For some people — particularly those earning over $120,000 — the tax savings alone make this strategy worth exploring seriously.

The Hours Question: Going Part-Time

For many Inner West clients, the TTR conversation isn’t just about tax. It’s about genuinely winding back hours.

Maybe you’re a professional who wants to go to three or four days a week. Maybe you’re a business owner thinking about stepping back from day-to-day operations. Maybe you’ve had a health scare, or a parent has, and you want more time before retirement arrives by force rather than by choice.

A TTR income stream can make a reduced salary workable. If your income drops from $120,000 to $80,000 because you’ve cut your days, drawing $20,000-$25,000 per year from your super can bridge the gap — keeping your lifestyle intact while you ease out of full-time work.

The key is making sure the income stream drawdowns are structured correctly and that your overall retirement income planning isn’t compromised in the process.

A Few Inner West Considerations Worth Knowing

TTR isn’t a one-size solution. In our part of Sydney, a few things tend to come up:

Property income complicates things. Many Balmain and Rozelle clients have investment properties generating rental income on top of their super and salary. The interaction between rental income, TTR drawdowns, and super contributions needs careful modelling — otherwise you can end up in a higher tax bracket than necessary.

Older properties mean capital gains tax exposure. If you’re planning to sell an investment property as part of your retirement transition, timing that relative to your TTR start date and any salary changes matters. CGT can be minimised with smart sequencing.

Spouses with different ages create opportunities. If one partner is over 60 and the other isn’t yet, there are often smart ways to split income and contributions that reduce the household tax bill considerably.

Owner-operated businesses have extra flexibility. If you run your own business, you have more control over the salary you draw, which means more levers available for TTR planning.

What TTR Doesn’t Do

A few things worth being clear about:

• TTR income streams are not tax-free if you’re under 60. Once you hit 60, the income from a TTR stream is generally tax-free. Under 60, it’s taxed at your marginal rate with a 15% offset. The strategy still works for many people under 60, but it works better once you’re past that birthday.
• TTR doesn’t boost your super balance on its own. You’re drawing down while you’re contributing. The net effect on your super balance depends entirely on how the numbers are structured.
• TTR income streams are subject to annual drawdown limits. Between 4% and 10% of your balance per year. You can’t draw more than 10% — which is a consideration if you’re planning to use it as a primary income source.

When TTR Works Best

TTR tends to work well when:

• You’re over 60, in a high tax bracket, and want to reduce your hours without reducing your lifestyle
• You want to increase your super contributions without reducing your take-home pay
• You have flexibility over your working arrangements — hours, contract structure, salary level
• You want a structured, deliberate transition rather than a sudden stop

It works less well when you’re under 60, your income is already low, or your super balance is small enough that the drawdowns are material to your long-term retirement income.

The Connection to Your Dairy Herd

Here’s how TTR fits into the 2 Cows Strategy.

A well-structured TTR strategy is essentially a way to start building your dairy herd earlier — to begin shifting your super from growth assets into income-producing assets — while you’re still contributing and still earning.

By the time you’re fully retired, you want your income portfolio established and milking consistently. TTR gives you the runway to make that transition deliberately, rather than in a rushed scramble when you hand in your notice.

Starting to think about income architecture before you retire — not after — is one of the most important things a pre-retiree can do. That’s the whole point of the 2 Cows Strategy.

Thinking About Winding Back?

If you’re somewhere between 55 and 65 and thinking about what the next phase looks like — whether that’s cutting hours, starting a TTR income stream, or just getting clarity on your numbers — the One Page Financial Plan is the right starting point.

One session. One page. Your retirement income target, where you stand, and what needs to happen to get you there.

Book Your One Page Financial Plan — $660 inc GST

adam@suncow.com.au  |  0418 785 200

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