Colin (age 60) is employed full time earning $100,000 and has a super balance of $600,000. He wants to reduce his working hours to 3 days per week for the next five years, and then retire fully at age 65. Colin uses all of his super to commence a TTR pension.
While Colin loses $40,000 p.a. in salary, he only needs to draw pension payments of approximately $26,000 (tax free as he is aged 60 or over) to replace this lost salary.
It is important to note that due to the pension payments and his reduced working hours leading to less employer super contributions, Colin’s super balance at retirement is $731,835, compared with $917,350 had he continued working full-time until age 65 – a loss of $185,515.
Disclaimers and assumptions:
- This example is for illustrative purpose only and is factual information calculated using the following assumptions. It doesn’t constitute general or personal advice and doesn’t take into account anyone’s objectives, financial situation or needs.
- TTR pension commences on 1 July 2023. 2023-24 income tax rates and thresholds apply in all years. TTR pension earnings 8% p.a. (with half of earnings taxed at 15%). No indexation is applied to Colin’s earnings in future years. All results in future dollars.