Your Salary, Your Super — How a Transition to Retirement Strategy Could Let You Have Both

Understanding Transition to Retirement (TTR) Income Streams in Australia

By Ravi Moolchandani, Principal Financial Adviser / Director, Radiance Wealth

Reading time: ˜8 minutes │ Updated April 2026 │ Melbourne, Australia

Of all the strategies available to Australians in the final years before retirement, the Transition to Retirement income stream is probably the most underused. Not because it is complicated — it is not, once someone explains it clearly — but because most people have simply never heard of it.

I have had clients sit across from me at 62, still working full-time, still paying tax at their full marginal rate, with a super balance they cannot touch — and when I explain what a TTR strategy could have done for them over the previous three years, the reaction is almost always the same. “Why did nobody tell me this?”

The short answer to that question is: most people do not have someone in their corner whose job it is to make sure they know.

A Transition to Retirement income stream, or TTR, allows you to begin drawing from your superannuation once you reach your preservation age — currently 60 for most Australians — even if you are still working. You do not have to retire. You do not have to reduce your hours. You simply gain access to a regulated income stream from your own super savings, which can be used in a couple of powerful ways.

This article explains both of those ways, who TTR suits, and how to think about whether it belongs in your plan. For the full picture on building a retirement strategy in your 50s and early 60s, see our Pre-Retiree’s Guide for Australians Aged 50–64.

What Is a Transition to Retirement Income Stream?

A TTR income stream is a regulated income stream you draw from your superannuation while you are still in the workforce. Once you reach your preservation age — age 60 for anyone born after 30 June 1964 — you are eligible to open one, regardless of how many days a week you work or how much you earn.

The income stream is drawn from your existing super balance and paid to you regularly, just like a salary. There are legislated limits on how much you can draw: a minimum of 4% of your account balance per year, and a maximum of 10%. You cannot access your full super balance as a lump sum through a TTR arrangement — it is an income stream only. And importantly, you cannot exceed that 10% drawdown limit regardless of circumstances.

The TTR was introduced by the Howard Government in 2005, with the stated aim of encouraging older Australians to remain in the workforce longer by giving them the flexibility to reduce their hours without suffering a corresponding drop in income. The mechanism was: draw a top-up from super to replace the income lost by working fewer days.

That remains one of the two core ways it is used today. The other — which we will come to shortly — is a tax-optimisation strategy that does not require any reduction in hours at all.

One important structural point: while your super is in TTR phase, earnings inside the fund are taxed at 15% — the same as the accumulation phase. This changed in 2017, when the government closed the tax-free earnings loophole that had made TTR particularly attractive in the years prior. The strategy still works, but it works differently than it did before — and that distinction matters when deciding which approach is right for you.

For more on how TTR income streams interact with your broader retirement plan, see our Transition to Retirement service page.

The Two Ways People Use TTR — and Which One Actually Works

There are two distinct TTR strategies in practice. Understanding the difference between them is essential, because they suit different people in different situations.

Strategy A: Reduce your hours, maintain your income

This is the original use case for TTR, and for many of my clients it is the most personally meaningful one.

The scenario: you are 61, you have been working five days a week for the better part of four decades, and you are ready to step back — but you are not ready to stop entirely. Maybe your super is not quite where you want it to be. Maybe you enjoy the structure and identity that work provides. Maybe you simply cannot afford a full income cut. Whatever the reason, you want to work three or four days a week without taking a significant pay cut.

A TTR income stream makes this possible. You reduce your working days and your salary drops accordingly. The TTR income stream fills the gap — drawing from the super you have already accumulated to top up your take-home pay to something close to what it was before.

The financial mechanics are straightforward. If you were earning $110,000 working five days and you drop to four days at $88,000, you have an annual shortfall of $22,000. A TTR income stream drawing approximately $22,000 from your super covers that gap. You live on effectively the same income. You work one less day a week. And the personal value of that — the time with grandchildren, the health benefits, the gradual psychological decompression from a long career — is something that does not show up in a financial model but matters enormously to the people I work with.

From age 60, TTR income payments are drawn from the tax-free component of your super tax-free, and from the taxable component with a 15% tax offset applied. For most people at 60 or above, this means TTR income is received tax-free or close to it — a significant advantage over simply drawing down a salary.

Strategy B: Keep working full-time, maximise super contributions

This is the pure tax arbitrage version of TTR, and it does not require you to change your working arrangements at all.

The mechanics: you continue working full-time at your existing salary. You set up a salary sacrifice arrangement with your employer, directing a significant portion of your pre-tax salary into super — up to the concessional contributions cap of $30,000 per year (including your employer’s super guarantee contributions, currently at 11.5% rising to 12% from July 2025). At the same time, you draw a TTR income stream from your existing super balance to replace the take-home pay you have sacrificed.

The result: your lifestyle is unchanged. Your take-home pay is roughly the same. But instead of paying tax on that portion of your salary at your marginal rate — which for many of my clients is 37% or 47% — you are now paying 15% on it inside super. For someone in the 47% bracket, that is a 32-cent-in-the-dollar tax saving on every dollar salary sacrificed.

I want to be honest about the 2017 changes here, because some of the TTR articles that still circulate online were written before them. Prior to 1 July 2017, earnings inside a TTR income stream account were tax-free — just like a full pension account. That made the tax arbitrage even more compelling. Since 2017, TTR earnings are taxed at 15%. The strategy is less powerful than it was, and for some people — particularly those already close to the contributions cap, or those with relatively modest super balances — the juice may not be worth the squeeze. But for high-income earners with meaningful super balances and several years before retirement, Strategy B can still produce genuinely worthwhile tax savings.

A Real-World Example

Let me make this concrete. The following is an illustrative scenario — not specific financial advice, but representative of the kind of outcome I see with clients in this position.

Sarah is 61, a senior manager in Melbourne earning $130,000 per year. She has $420,000 in super and plans to retire at 64. She is in good health, enjoys her work, and is not ready to reduce her hours. But she wants to be making the most of the next three years.

Here is what her position looks like with and without a TTR strategy:

Note: figures are illustrative only. Individual outcomes depend on super fund structure, tax components, income, and personal circumstances. This is general information, not personal financial advice.

In this scenario, Sarah takes home slightly more each year with the TTR strategy in place — but more importantly, she is directing an additional $18,500 into super each year at a 15% tax rate rather than her marginal rate of 39% (including Medicare). Over three years, the tax saving on contributions alone runs to approximately $14,400. And that is before the compounding effect of having more money inside super for longer.

The strategy does not change her working life at all. She shows up the same days, earns the same salary, lives the same lifestyle. What changes is the tax efficiency of how her money flows.

What TTR Does NOT Do — Setting the Record Straight

Because TTR is often discussed in shorthand, there are a number of persistent misconceptions worth addressing directly.

You cannot access your full super balance as a lump sum.

A TTR income stream pays you a regular income within the 4%–10% drawdown band. It does not allow you to withdraw your entire balance. Full lump-sum access only becomes available once you meet a condition of release — most commonly, retiring after reaching preservation age, or turning 65.

TTR earnings are not tax-free.

Since 1 July 2017, investment earnings inside a TTR income stream account are taxed at 15% — the same as the accumulation phase. The zero-tax earnings environment that applied before the 2017 reforms no longer exists. This does not make TTR unviable, but it does mean the strategy needs to be evaluated on current rules, not outdated ones.

TTR is not the same as retiring.

Starting a TTR income stream does not trigger a change in your employment status, affect your employer obligations, or constitute retirement for any legal or Centrelink purpose. You are still working. Your employer still pays super guarantee contributions. Your Age Pension eligibility clock does not change.

TTR income is not automatically tax-free.

From age 60, TTR income drawn from the taxable component of your super attracts a 15% tax offset, which effectively eliminates tax for most people in that position. But the tax treatment depends on your age, the tax components of your super balance, and your other income. It is worth confirming the specifics with an adviser before assuming zero tax applies.

TTR automatically converts when you fully retire or turn 65.

Once you meet a full condition of release — retiring after preservation age, turning 65, or meeting another condition — your TTR income stream automatically converts to an account-based pension. At that point, the 10% drawdown cap disappears, and earnings in the fund move to the 0% pension phase tax rate.

For a comprehensive overview of how the rules work, our Transition to Retirement page covers the mechanics in detail.

Is TTR Right for You?

TTR is a genuinely useful strategy for a specific type of person in a specific window of life. It is not universal — and it is worth being honest about who it suits and who it does not.

TTR tends to work well for:

1. Australians aged 60–64 who are still working and want to reduce hours without a significant income reduction
2. High-income earners who want to maximise concessional contributions in the final years before retirement and have enough in super to make the income stream meaningful
3. People with a super balance of $200,000 or more — below that, the 4%–10% drawdown band may produce an income stream too small to justify the administrative and advice costs of setting it up
4. Those with three or more years until planned retirement, where the compounding tax savings have enough time to accumulate

TTR tends to be less suitable for:

5. Those who are already at or close to the $30,000 concessional contributions cap through employer contributions — the salary sacrifice component of Strategy B becomes limited
6. Those planning to retire within the next 12 months — at that point, simply waiting and converting to an account-based pension in full retirement is usually more straightforward
7. Those with low super balances where the income stream is minimal and the administrative burden outweighs the benefit
8. Those whose marginal tax rate is relatively low — the tax arbitrage in Strategy B is most compelling for people paying 37% or 47% on their top dollar of income

If you are unsure which category you fall into, a conversation with a financial adviser is the most direct way to find out. Our Pre-Retiree’s Guide also covers TTR in the context of your broader pre-retirement strategy, alongside super contributions, the Age Pension, and retirement income planning. Our retirement planning service includes a full assessment of whether TTR fits your situation.

How to Set One Up — and Why You Should Not Do It Alone

The practical steps to establishing a TTR income stream are not complicated, but the calibration of the strategy is.

First, check your eligibility. You need to have reached your preservation age (60 for most Australians) and still be gainfully employed. If you meet those two criteria, you are eligible.

Second, check whether your existing super fund offers a TTR income stream. Most major industry and retail funds do, but not all. If yours does not, you may need to either establish a separate account with a fund that does, or roll your balance to one. This is a decision that warrants advice — rolling super funds can affect insurance cover and there may be exit fees depending on the fund.

Third — and this is where people often get into difficulty — the salary sacrifice arrangement, the TTR drawdown amount, and the concessional contributions cap all need to be calibrated together. Set the salary sacrifice too high and you risk exceeding the contributions cap, which triggers excess contributions tax that can wipe out the benefit entirely. Set the TTR drawdown too low and you may not replace enough take-home pay to make the strategy liveable. Set it too high and you erode your super balance faster than planned.

These moving parts interact with each other and with your personal tax position, your super fund’s investment returns, and your broader financial picture. Getting one element wrong does not just reduce the benefit — it can produce a worse outcome than doing nothing.

The strategy also needs to be reviewed annually. Your salary may change. Your super balance will move. The concessional cap may be adjusted. Your plans for retirement may shift. A TTR arrangement that was well-calibrated at 61 may need meaningful adjustment by 63.

“The TTR strategies I enjoy implementing most are the ones where a client comes back six months later and says: I’m working four days a week, I’m taking home the same money, and my super is growing faster than it was before. That’s when the planning pays off.”

— Ravi Moolchandani, Radiance Wealth

The Window Is Open — But It Will Not Be Forever

If you are between 60 and 64 and still working, the TTR window is open to you right now. Whether it belongs in your plan depends on your income, your super balance, your timeline, and how you want the next few years to look and feel.

The worst outcome is the one I see too often: people arriving at retirement having paid full marginal tax on every dollar of income right up until their last working day, without ever knowing there was an alternative.

At Radiance Wealth, we help Melbourne pre-retirees understand and use strategies like TTR as part of a broader retirement plan — one that accounts for your super, your tax position, your property, and what you actually want your retirement to look like. A good place to start is our Pre-Retiree’s Guide for Australians Aged 50–64. Or if you are ready to talk through your specific situation, we would love to hear from you.

Book a Transition to Retirement strategy conversation with Ravi or Sunny.

Call (03) 9590 6341 | Visit radiancewealth.com.au/contact-us

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