Transition to retirement
Transition to retirement, or TRIP as it’s also known, is a method whereby your superannuation fund can be in pension mode (money out) and accumulation mode (money in) at the same time. A popular TRIP strategy is to salary-sacrifice up to your annual concessional contributions cap (currently $25,000 a year), and then receive pension income from a TRIP.
To ‘take a TRIP’ you need to have reached your preservation age, which depends on your date of birth but is at least 55.
Date of Birth Preservation Age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
After 30 June 1964 60
You must withdraw between 4% and 10% of the balance in your fund.
Will a TRIP work for you? That depends on whether the amount of tax you save is greater than the tax that is payable. So you need to consider your tax bracket, as well as the make-up of the balance in your fund, because you will be paying tax on the proportion of the withdrawal that represents concessional contributions on ‘the way out’. In the following example, $20K of Fred’s $50K withdrawal will be added to his taxable income. He will then receive a $3K credit in respect of tax already paid.
Clime Super can help you decide what is the most beneficial strategy in your circumstances. Once you have all the facts and have made the decision to take a TRIP, Clime Super will handle all the associated administration and paperwork.
The information provided on this webpage and the rest of clime.com.au is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.