Transition to retirement calculator: is it actually worth it?
The short answer. From age 60 you can draw 4–10% of your super each year as a tax-free pension while still working. Pair that with salary sacrifice and you swap income taxed at your marginal rate for income taxed at nothing, paying only 15% contributions tax on the way in. It works when your marginal rate is well above 15% - broadly, incomes between about $45,000 and $250,000. Outside that band, or if you draw more than the tax saving, it can leave you worse off.
The verdict
Worth modelling properly: about $3,060 a year of tax saved.
You come out roughly $3,060 a year ahead across take-home pay and super combined, and about $41,861 better off in super by 67. The next step is checking it against your actual fund rules, cap history and insurance inside super, because those are where TTR strategies usually come unstuck.
| This year | Do nothing | With TTR |
|---|---|---|
| Take-home pay | $91,080 | $88,840 |
| Net into super | $12,240 | $17,540 |
| Personal tax paid | $28,920 | $23,160 |
| Combined position | $103,320 | $106,380 |
Net tax saved a year
$3,060
$5,760 off your personal tax, less $2,700 going in at 15%.
Super at 67
+$41,861
$467,519 with TTR against $425,658 without, over 7 years at 4% real.
General information only. This compares the arithmetic of two scenarios using 2026-27 tax rates and super thresholds. It assumes a 4% real return, that the pension payment is tax free (correct from age 60), and that your circumstances hold steady. It does not know your fund's rules, your insurance inside super, your unused cap from earlier years, or your objectives - and starting a TTR pension can affect insurance cover and Age Pension assessment. Moneysmart publishes a free calculator too. Not personal advice.
When transition to retirement is a bad idea.
Every super fund publishes a TTR calculator, and not one of them will tell you to walk away. Here is when you should.
- Your income is under about $45,000. The whole benefit is the gap between your marginal rate and the 15% contributions tax. At the 15% bracket there is no gap, and you have added an account, a drawdown obligation and paperwork for nothing.
- You earn over $250,000. Division 293 taxes your concessional contributions at 30% instead of 15%. The strategy still works, but it is worth roughly half what a fund's calculator will quote you, and that calculator almost certainly did not ask.
- You hold meaningful insurance inside super. Moving a balance into a pension account can reduce or cancel life, TPD and income protection cover attached to the accumulation account. Losing TPD cover at 61 to save $3,000 of tax is a bad trade, and it is the single most common way these strategies go wrong.
- You are already at your concessional cap. With SG at 12%, a $270,000 earner is close to the $32,500 cap on employer contributions alone. Sacrificing past it is taxed at your marginal rate plus an interest charge.
- You move your whole balance into the pension. This is the quiet one, and it catches people who did everything else right. The minimum drawdown is 4% of whatever sits in the TTR account, and it is compulsory. Move $600,000 across when you only needed $250,000 to replace the sacrificed income and you are forced to withdraw $24,000 a year instead of $10,000 - the extra comes straight out of your retirement for no benefit at all. Move only what the strategy needs.
- You are drawing more than you are saving. If the pension payment exceeds the tax benefit, you are simply spending your retirement early. That is a legitimate choice when the goal is to work three days a week instead of five - the original purpose of TTR - but it is not a wealth strategy, and it should be a decision rather than a surprise.
One correction worth making, because the internet is full of it: since 1 July 2017 the earnings inside a TTR pension are taxed at 15%, exactly like accumulation. Articles promising a tax-free earnings environment are describing rules that ended nine years ago.
Is it worth it at my income?
Sacrificing $20,000 a year (or whatever cap room is left after 12% employer contributions), at 2026-27 rates. The last column is the net annual benefit after the contributions tax is paid.
| Salary | Sacrifice | Personal tax saved | Contributions tax | Net benefit |
|---|---|---|---|---|
| $40,000 | $20,000 | $3,095 | $3,000 | $95 |
| $60,000 | $20,000 | $6,125 | $3,000 | $3,125 |
| $80,000 | $20,000 | $6,500 | $3,000 | $3,500 |
| $100,000 | $20,000 | $6,400 | $3,000 | $3,400 |
| $120,000 | $18,100 | $5,792 | $2,715 | $3,077 |
| $150,000 | $14,500 | $5,655 | $2,175 | $3,480 |
| $200,000 | $8,500 | $3,995 | $1,275 | $2,720 |
Includes the Medicare levy and the low income tax offset. Division 293 (an extra 15% above $250,000) is applied where relevant. The sacrifice is capped at the room left under the $32,500 concessional cap.
How much you must draw, and may draw
| TTR account balance | Minimum (4%) | Maximum (10%) |
|---|---|---|
| $200,000 | $8,000 | $20,000 |
| $300,000 | $12,000 | $30,000 |
| $400,000 | $16,000 | $40,000 |
| $500,000 | $20,000 | $50,000 |
| $750,000 | $30,000 | $75,000 |
| $1,000,000 | $40,000 | $100,000 |
Recalculated on 1 July each year against the balance at that date. The maximum applies while the pension is in transition phase; it falls away once you retire or turn 65.
Tax rates 2026-27, and the gap that pays for the strategy
| Taxable income | Marginal rate | Margin over 15% contributions tax |
|---|---|---|
| $0 – $18,200 | Nil | — |
| $18,201 – $45,000 | 15% | 0% |
| $45,001 – $135,000 | 30% | 15% |
| $135,001 – $190,000 | 37% | 22% |
| $190,001 and above | 45% | 30% |
Excludes the 2% Medicare levy, which widens the margin slightly. Above $250,000 the contributions tax doubles to 30%, halving the margin.
The other numbers that decide it (from 1 July 2026)
| Threshold | Amount |
|---|---|
| Preservation age | 60 (born after 30 June 1964) |
| Concessional contributions cap | $32,500 a year |
| Non-concessional contributions cap | $130,000 a year |
| Superannuation Guarantee rate | 12% |
| Division 293 threshold | $250,000 |
| Transfer balance cap | $2,100,000 |
| Tax on TTR pension payments (age 60+) | Nil |
| Tax on earnings inside a TTR pension | 15% |
Caps and thresholds are indexed on 1 July. Payment rates for the Age Pension move separately, on 20 March and 20 September.
What this tool cannot tell you.
- It does not know your fund. Whether it offers a TTR pension, what it charges to run a second account, and what happens to your insurance when you move a balance across are fund-specific and they matter.
- It does not know your cap history. Unused concessional cap from the past five years can be carried forward if your total super balance was under the threshold, which can change the answer substantially.
- It assumes a 4% real return and steady circumstances for the projection to 67. Real returns are not steady.
- There is a free version. Moneysmart publishes a super and pension calculator at no cost, and your own fund almost certainly has one. This page exists for the part they leave out.
- It is general information, not advice. Starting a TTR pension is a decision with tax, insurance and estate consequences, and it is worth an hour with a licensed adviser before you sign anything.
Transition to retirement, answered.
What is a transition to retirement pension?
A TTR pension lets you draw an income stream from your super while you are still working, once you reach your preservation age of 60. You keep your job and your employer keeps contributing; alongside that, part of your super starts paying you an income. It is used two ways: to cut back your hours without cutting your income, or to salary sacrifice hard into super and replace the lost take-home pay with the (tax-free from 60) pension payment.
What are the disadvantages of a transition to retirement pension?
Four real ones. First, you are drawing your super down while you are still working, so unless the tax saving more than covers the drawdown your final balance is smaller. Second, since 2017 the earnings inside a TTR pension are taxed at 15%, the same as accumulation, so the old earnings-tax advantage is gone. Third, moving money into a pension account can reduce or cancel the insurance cover attached to your super, which is a serious risk in your sixties. Fourth, above the $250,000 Division 293 threshold your concessional contributions are taxed at 30% rather than 15%, which halves the benefit. The calculator above flags all four.
How much can I withdraw from a transition to retirement pension?
Between 4% and 10% of the account balance each financial year. The minimum is compulsory and the maximum is a hard ceiling while you remain in transition phase, and unlike an ordinary account-based pension you generally cannot take lump sums. Once you fully retire or turn 65 the pension converts to retirement phase, the 10% cap disappears and the earnings inside it become tax free.
At what age can I start a transition to retirement pension?
60. Preservation age is now 60 for everyone born after 30 June 1964, so in practice it is 60 for anyone still in the workforce. You do not have to retire or reduce your hours to start one. Note that the Age Pension is a separate thing entirely and does not start until 67.
Is a transition to retirement pension tax free?
The payments to you are tax free from age 60 - that is the engine of the whole strategy, because it lets you replace salary (taxed at your marginal rate) with pension income (taxed at nothing). The earnings inside the TTR account are a different matter: they are taxed at 15%, the same as accumulation, since the 2017 changes removed the exemption. A lot of older articles still say otherwise.
Does a TTR pension affect the Age Pension?
It can. Once you reach Age Pension age, an account-based or TTR pension is assessed under both the assets test (at its balance) and the income test (deemed, for most pensions started after 2015). Drawing your super down earlier through a TTR reduces your assessable assets later, which can increase your Age Pension - so the two strategies interact, sometimes helpfully. Our Age Pension calculator models that side of it.
Is transition to retirement worth it?
It depends almost entirely on the gap between your marginal tax rate and the 15% contributions tax. Above roughly $45,000 of income the gap opens up and the strategy starts to pay; above $250,000 it narrows again because Division 293 doubles the contributions tax to 30%. The sweet spot is a middle-to-upper income earner aged 60 to 67 with cap room to spare. Below $45,000 it is usually not worth the complexity, and the calculator above will say so.
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A TTR pension is a decision, not a calculation.
The arithmetic above is the easy part. Whether it fits your fund, your insurance and your actual plan for the next seven years is the conversation. The first one is free.
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