After the birth of her first grandchild, Janet is planning to reduce her hours to help care for the baby when her daughter returns to work.
Although she will continue to work three days a week, Janet is concerned about her ability to meet her daily living expenses with a reduced income.
By commencing a transition to retirement pension, Janet can still receive the same take-home income as when she worked full time – even after reducing her work hours.
Using a transition to retirement strategy that supplements Janet’s reduced salary of $21,000 with a pension payment amount of $11,612 p.a., she can still maintain the same take-home income of $31,925.
It is important to be aware that drawing down superannuation benefits to supplement income can result in less superannuation in retirement. This is something that Janet must consider when deciding to reduce her work hours.
Assumption: Janet’s superannuation account balance of $240,000 is comprised of a 70% taxable component and 30% tax-free component.
Source: OnePath Life LTD dated June 2011