11 May 2023
While many people eagerly look forward to their golden years as a time to relax and enjoy life, the transition from work to retirement needs careful planning. In this episode, join Australia Retirement Trust’s Member Education Officer, Patrick Dunlop, and our host, Head of Advice and Guidance, Anne Fuchs, as they explore strategies you can use to transition to retirement that allow you to work less while continuing to grow your super.Listen to more podcasts
Hello and welcome to Australian Retirement Trust's Super Insider podcast series.
It's all about investments, the economy, and strategies to make sure that you can maximise
your hard-earned retirement savings.
Now, my name is Anne Fuchs,
I'm head of Advice and Guidance
at Australian Retirement Trust,
and the team and I love providing help, guidance
and advice to our members
so they can make the best possible choices
for them. So, they can relax, put their feet up,
and enjoy their retirement at the end of their working life.
Now, with me today is Patrick Dunlop,
but before I introduce him,
I will acknowledge that we're on Turrbal and Yuggera country
and I'd like to pay my respects
to Elders past, present and emerging.
Now, Patrick is part of the Advice and Guidance team,
which is very cool.
It's good to have you here.
He's been with Australian Retirement Trust
for 13 years, was a Heritage QSuper person --
-Yes, QSuper. -And spent so many years out
on the road talking to members
about all things superannuation, investments,
So, you are absolutely so welcome
to our Super Insider Club,
so we can get some knowledge out of your head.
Because today we're talking retirement,
transition to retirement.
[Patrick Dunlop] Transition to retirement.
Indeed, we are.
And, look, I know there are lots of members
thinking about whether this is a strategy
that could be good for them.
So, I'm excited to get into it.
But before we do that,
we have the good old general advice warning.
[Patrick Dunlop] General advice warning.
Yes, yes, yes.
So, off you go.
Before we jump in, I need to let everyone know
that what we're going to talk about
is general information only.
Any advice doesn't take
into account your personal situation.
You should consider your circumstances
and think about getting personal advice
before acting on anything we discuss.
You can also get a copy
of our Product Disclosure Statement from our website,
or by calling us on 13 11 84
if you have a Super Savings account
or 1300 360 750 if you have a QSuper account.
[Anne] Beautiful, Patrick,
and I have to say, you mentioned you were
a radio --
[Patrick Dunlop] Radio, back in the day,
so many lifetimes ago
back in Auckland, New Zealand,
I was on a station that played hits of the seventies,
eighties and nineties and today.
Sounds like my type of station.
[Patrick] Yes, I think it's most people's
type of station, if I'm honest, but I won't ...
We won't get ...
Anyway, it's certainly
great to have you on Super Insider.
So many of our members get to a point,
particularly members who are on their feet
who have physical jobs,
get to 60, late 50, 60,
and just are quite frankly exhausted,
and are crawling to the finish line.
Where obviously other people, retirement's
something they want to put off to never
because they can sit and just work
from their computer.
So, with that context, are you able
to explain, what are the rules around
when you're allowed to retire?
So, once you reach something
called your preservation age,
which is a term I actually don't like -
I, kind of, hate that.
So, preservation or access age,
as I like to call it,
it's based on your date of birth.
So, depending on when you were born,
that determines when you can access your Super.
Once you reach your own personal preservation age,
you can start to draw upon your super if you retire.
But something else you can do for those people
who may be thinking they're crawling
towards their retirement
is something called transition to retirement
where you can continue working
but you can start to draw down some of your super.
And a big reason behind this was just
to allow people to continue to work,
to put in their expertise into their field.
So they still had that experience
that their colleagues could draw upon,
but they were still earning an income.
So, these people might be able
to potentially reduce their working hours,
draw down some of their super,
but maintain the same lifestyle.
And that's really the main idea behind transition to retirement
Which is kind of great
if you want to surf more or look after an ageing parent,
whatever it might be.
But let's maybe go to some of the key ages.
So, in terms of eligibility for the Age Pension, Patrick,
what do our listeners need to know there?
Sure. So, one thing I do want to make clear,
because a lot of people I speak to do get this conflated.
But Age Pension access age
and super access age are completely different.
So, a lot of people don't realise that.
Preservation age determines
your super access eligibility,
whereas the Age Pension requirements determine that.
And for most people born after the 1st of January '57,
their Age Pension access age would be 67,
whereas for most Australians,
their super access age would actually be 60.
So there's a bit of discrepancy there
and, again, a lot of people don't realise that difference.
And what about this transition
to retirement strategy that we're talking about today?
What's the age access there?
Sure. So, again, have
to meet your own personal preservation age.
So, if you are born after the 1st of July 1964,
your preservation age would be 60.
So, once you hit 60, if you decide to continue to work,
you don't need to do transition to retire,
it's just an option available to you.
But once you reach that age,
you could set one up, you could start
to draw upon some funds out of that account
if you wish to maintain your lifestyle.
Like I said before,
maybe you've reduced your working hours,
whatever it might be.
So I'm still getting my take-home pay
with the less hours, and then I'm getting an income.
So, do I move out of my ...
do I get a new super account set up
and so I'm taking income
and that complements my take-home pay?
Yes. So, basically while you're working
you have your money that's receiving contribution
from your employer and yourself, potentially.
So, you'd have to move money out of that account
into a separate standalone Transition to Retirement account.
And from there, that's where you receive those payments.
And you can typically ask to be paid,
what sort of frequency you want.
It's really up to you how you structure it.
But the main thing is a lot of people, I think,
still assume that you can effectively take all
of your funds out of super; that isn't the case.
There is a limit on what you can take
and it is capped at 10 per cent of whatever balance you move
into that account.
But I think there's some really great things
about transition to retirement, tax
and also still seeing the investment earnings.
So, maybe we should talk about those two components
of why TTR is great for members to consider.
Sure. Especially if someone's preservation age was 60,
once you reach the age of 60
any lump sum withdrawal, any income stream payment
from super is 100 per cent tax free.
And I actually love telling my members,
if you're over the age of 60
and your only source of income in retirement
is from super, you never actually have
to speak to the ATO. So, a lot of people love that.
[Anne Fuchs] Woohoo, yay!
Now, of course, a lot of people love that.
But if you're still working,
you start drawing upon - if you're 60,
that would be tax-free.
So, the best aspect of that is you probably
don't have to take as much out of your TTR account
to make up that shortfall of your income,
because you don't have to account for the tax.
I think that's a really important point.
And obviously that money then, too,
it's still being invested, isn't it?
Of course, yes.
So in relation to that, you've still got investment choice.
It's really up to you how you want
that money to be invested.
I've spoken to a lot of members who,
while they were working, building up their super,
they went a bit more aggressive to try to grow it.
But when they moved some money
into their Transition to Retirement, or TTR, account,
they made it a bit more defensive.
So, you can absolutely do that;
it doesn't have to be the same investment approach.
It's really your choice,
but you still do have investment choice,
which is important to know.
There are some other products that super funds offer
where you don't have that kind of choice.
So, it's really important to understand TTR does offer
that choice for you.
And if you're thinking about the right investment choice,
we do have a podcast with Liz Kumaru,
who's from one of our investment professionals,
which gives a real deep dive
into the different investment options.
If you are listening to what Patrick's talking about
and thinking, 'Okay, what would be the right thing for me?'
So, is it easy, if you've got to the point
you're working, you're winding down your hours,
what is it about your personal situation then
that makes you then think,
'All right. Well, TTR is no longer right.
I need to just move into, say, Income,
an Income account, or that type of thing'?
You can have a TTR account up to the age of 65.
Once you hit 65, again, a lot of people don't realise this,
but you then have full access to your super.
So, even if you're still working,
you've got 100 per cent access; you can take all of it out.
So, once you hit 65, TTR doesn't apply,
it's just a standard Income account.
But to answer that question,
I'd actually have to pose that question back to the person.
So, I would say, 'Look, if you're thinking
about completely winding up,
what are you thinking of doing
in your retirement?
What is that going to look like?
How much money do you require every year?'
So, I ask these sorts of questions
when I get asked about TTR just to try
to determine what steps would be right
for the person I'm speaking to.
And I think that's spot-on
again, Patrick; everyone's situation is different.
Are they retiring with a mortgage?
Are they not?
Which is why advice comes in.
I do worry, though, a lot of members - I worry
and I see the great work our team does talking
to members about the risks of just pulling it all out
and putting it in the bank.
Or hiding it under the bed, even worse,
and the impact that has
in terms of the quality of people's retirement.
Absolutely. Again, when people come up to me
and say, 'Look, do I need a TTR account?',
my first question is, 'Do you need access to cash?'
If their answer is, no,
then it's probably not right for them.
But if they say,
'Look, I do, because I'm reducing my hours',
or 'Yes, I do, because I'm increasing my contributions in,
which reduces my take-home pay',
or 'I simply need to pay off my mortgage',
I'd say to them, 'Look, TTR could be right for you.'
But I always explain, just remember
you could be potentially robbing from your future self
to pay your current self.
Is that the right move for you?
And that, of course, is where advice and guidance comes in.
So, if they do get to that level,
'Yes, I do need some access to cash', I'd say,
'Look, get some level advice just
to make sure it is right for you.'
But I've had a lot of people who come up to me to say,
'Look, I've been told I should do TTR. Should I do it?'
And as soon as I ask that question,
'Do you need access to cash while you're working?',
as soon as they say ‘no’ it's not right.
So, I always ask that question
because, again, it really determines should they need
that type of account or not.
A lot of people are told that they need it
and they probably don't in the long run.
I know members find this very daunting.
There aren't high levels of financial literacy in Australia.
[Patrick] That's right.
And retirement is a very emotionally charged time.
Just the pure emotions associated
with the actual or perceived complexity
of having to deal with super fund, income,
potentially Centrelink, can be overwhelming.
What are your reflections, Patrick,
as someone who's spoken to members for 13 years
about actually the wellbeing part for our members
around that transitioning into retirement?
What I find is the people who do want to do a TTR account,
a lot of them just want to keep working.
So, for me, like, I always ask a question
at my seminars, 'Who loves working?'
I put my hand up because I've been doing this job
for 12 years or 13 years, but 12 years in this role.
And a lot of people just want to continue working.
But what they realise is that by giving five days a week
they're really not going to last much longer,
and that could actually impact the quality
of their retirement as well.
So, with this TTR approach, it just does allow them
to ease off the gas towards the end of their working career
so they can slowly ease into that retirement.
And for a lot of people that's the best way for them
to maintain their lifestyle.
And we do see a lot of people
who maybe pull the pin immediately.
They often feel maybe a bit disillusioned with retirement,
not quite sure it's right for them,
even jump back into work.
But by winding down those hours slowly
over a period of time, drawing upon their super,
it gives them a ‘try before you buy’ type of approach.
So, it's a really great approach if you're thinking
of retirement but you're not entirely sure,
or as I keep saying if you just need access to cash.
I know many members, they get to their sixties
and they are either embarrassed or scared to look
at their balance because they then are regretful,
'I wish I'd done more earlier.’
‘I wish I'd paid more attention earlier.’
And I guess this is, it's like,
I always use the sunscreen analogy:
it's never too late to put on sunscreen.
It's never too late to get your skin checked.
And equally, too, the choices about
how you make your retirement income last,
there's obviously take more investment risk,
work longer, pass away earlier.
No-one wants to do that.
So, therefore, this is an opportunity to extend --
[Patrick] That's right.
Extend that money, their contributions.
So, it's a nice kind of middle ...
And the other thing, too,
if they do decide to stop working,
obviously no more income from their employer,
no more contributions from their employer.
Whereas by doing that TTR approach,
still getting some income from their employer
and contributions as well.
So, it's a two-pronged approach.
It really can help that super last the distance
by simply still contributing to it
for a few more years for them, absolutely.
Well, I know that you
and the team are out in our regions.
We have these webinars on YouTube.
What's your favourite thing about your job, Patrick?
My favourite thing would be doing
what we call our Member Directs,
which are normally to about 200-300 people.
It's just because you actually see that instant reaction.
I always love to tell a story
of two couples I've met in my time in working for ART.
And one couple I met retired with about $1.3 million.
They had this approach in terms of
what they were going to do.
They were going to travel the world.
One of their cruises they were going to do was $66,000 each.
They were going to do all these sorts of things.
And then I compare that to another couple I met
who retired with $300,000.
They were going to buy a caravan, travel around Australia.
Very different approaches for retirement.
Five years later I saw both of those couples again.
The couple with $300,000 still had most of their balance,
but that couple with $1.3 million had spent every cent.
So, it really comes back
to firstly advice and guidance,
but really figuring out what your lifestyle is going to be.
So, that's why I think a TTR approach can be really good
for a lot of people,
because it simply means your super is going
to potentially last a lot longer,
because you're still contributing to it
and you're not drawing out of your super as much
compared to someone who's fully retired.
Thank you so much for all you do
and bringing that knowledge and passion here today
to Super Insider.
It's been wonderful having you on the program.
[Patrick] You're welcome. Thank you so much.
You can find us on YouTube,
on Apple Podcasts, on Spotify.
I just like saying Spotify
because I pretend I’m famous for a tic and
hopefully my kids see me one day
with their Hip Hop and Rap playlists.
Tell your family and friends about it.
We really want Super Insider to be that accessible way
for you to educate yourself about your most precious -
probably the biggest asset
or second biggest asset you'll ever own.
So, thanks for joining us
and we look forward to you joining us again soon.
This podcast is general information only and brought to you by Australian Retirement Trust Pty Ltd (ABN 88 010 720 840, AFSL No. 228975) as trustee for Australian Retirement Trust (ABN 60 905 115 063) (the Fund).