Managing your money might require a rethink in retirement, particularly as your savings may need to stretch over decades.
Not only do you need to think about your day-to-day finances, but it’s also important to consider how much you’re likely to need in the longer term.
Retirement planning tips
To get started, here are some tips from Colin Dyer, client director at abrdn financial planning…
1. Create a retirement savings plan
“Retirement is a marathon, not a sprint, so make sure you have an income plan that reflects that,” says Dyer.
“While celebrating and treating yourself in your early days of retirement is well deserved, it’s important you think ahead and create a plan as to how you’re going, to make sure your money lasts for the duration of your retirement.”
Many online calculators can help you estimate what your retirement income could look like.
“However, it’s worth remembering, for most people there isn’t a flat level of income needed throughout retirement, so you need to factor the ups and downs into your planning,” Dyer adds.
“People often spend more in the early years of retirement when they are fit and healthy, and their income needs may flatten out over time. But retirement costs often rise again in later life.”
2. Monitor your money
Household finances have been hit by the coronavirus pandemic.
Dyer says: “You need to work out how you are going to navigate these setbacks. Of course, on the flip side, it might be some of these challenges mean you are spending less than planned, and therefore you might be able to afford things in the future you hadn’t considered an option.”
3. Grow your pension savings
“Money in your pension is usually still being actively invested, and it is going to have a better chance of growing if it remains invested – rather than sitting in your current account waiting to be spent,” explains Dyer.
“If you have any extra savings that aren’t in your pension pot, it might be worth investing these in something like a stocks and shares ISA.”
4. Be tax efficient
Generally speaking, a quarter of people’s pension pots tend to be tax-free.
“Every penny counts when managing money in retirement, and that is especially true when it comes to tax savings,” says Dyer.
“Every pension or savings pot you have may be taxed differently, and you will want to be smart with how and when you take withdrawals from each. Be aware of how much you withdraw each year, and how the amount impacts your tax bracket.”
5. Finally, don’t be afraid to ask for help
Dyer suggests if you’re not sure about the best course of action, a financial adviser might be able to help.
Free guidance is also available from the UK Government-backed service Pension Wise (you can find it on the moneyhelper.org.uk website).