Your financial situation will almost certainly change when you retire. Your income is likely to fall and our spending patterns often change as we get older – for example, because mortgages and other loans have been paid off. Read on for useful tips on managing the financial changes retirement can bring.
Draw up a budget for your retirement
Don’t wait until after you’ve retired to deal with changes to your financial circumstances.
Many of these changes can be estimated and prepared for in advance. The links below will help.
By drawing up a budget for your expected income and spending as early as possible you’ll give yourself a much greater sense of control over your situation.
You can always revise your budget later to reflect any areas where your estimates were wrong.
If your budget reveals a gap between your spending and your income, then you need to look for ways to increase your income, cut your spending, or both.
Identify possible cuts in your spending
Your budget of income and spending might identify areas where you’re spending more than you might have expected, and where you think you could easily spend less.
To take a more systematic approach to finding savings, follow the links below to use our Quick cash finder and to read some of our articles on cost-cutting.
Look for ways to increase your income
Boost your pension if you still have time
If you haven’t retired yet, you might still have time in the last few years before retirement to boost your pension income by increasing your contributions by as much as you can afford.
This option can be especially attractive if your employer will partly or fully match your extra contributions.
Another option might be to defer the date on which you start taking your pension income – this can increase your income because your savings have longer to build up and your pension will be payable for a shorter period.
Track down your personal or workplace pensions
It can be surprisingly easy to lose track of a pension, particularly one from a job you might have held early in your career.
The easiest way to find an old pension is to contact the Pension Tracing Service on 0800 731 0193.
For more information, click on the link below.
Claim your State Pension and other government entitlements
Make sure you claim any State Pension entitlement you’ve built up.
Your State Pension won’t be paid to you automatically – you must claim it.
You should also check whether you’re entitled to Pension Credit or other retirement benefits that might be available to you.
Follow the links below for further details:
Review the performance of your savings and investments
It’s a good idea to keep some savings in an easy-access account in case you need it in an emergency.
Three months’ spending money is often recommended, but smaller amounts will also give you a valuable cushion.
If you have additional savings or investments, you should review them regularly to make sure your money is working as hard as possible for you.
Consider whether your home might be a source of income
If you own your home, it probably represents a large proportion of your wealth.
You might be able to access some of this by using equity release.
In effect, this means you receive a loan now, which gets paid off later when your home is sold if you move in with relatives or into care, or on your death.
A less far-reaching way of generating an income from your home is to take in a lodger if you have the space.
Under the government’s Rent a Room scheme, no tax is charged on the first £7,500 a year you earn from a lodger.
Work during your retirement
There is nothing that requires you to stop working just because you’ve begun taking a pension.
It might not be your first option if you’ve been looking forward to retirement as a time to relax, but continuing to work – perhaps part-time – is one of the most effective ways to boost your income.
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