Budget for your retirement
Assessing your living costs when you retire is crucial to planning your retirement income.
Changes to your spending
Your cost of living will change when you retire, with some expenses increasing while others decrease. For instance your mortgage may be paid off, but you may need to pay more for health care.
Your health and lifestyle plus what you want from your retirement will affect what you spend money on. You might eat out more, take holidays or spend more on energy bills as you will be at home more often.
What will you spend your money on?
To get an idea of where your money needs to go, try categorising your expenses into four types:
|ESSENTIAL||This includes those items of expenditure that you have to make sure you have sufficient income to cover such as:
|IMPORTANT||This will cover expenditure which, though not essential, most of us would consider critical such as:
|DISCRETIONARY||Discretionary expense might include:
|OCCASIONAL MAJOR||Cover for unforeseen or major items of expenditure. For example:
Then match your expenses to the following income sources:
|GUARANTEED||It’s critical that your essential expenditure is covered so make sure you have enough guaranteed income:
|RELIABLE||Reliable sources of income should be used to cover important expenses:
|VARIABLE||Examples of variable income could include:
|OTHER ONE-OFF SOURCES||These could include:
If you’d like to look more closely at your budgeting then the Money Advice Service has a helpful budget planner which allows you to work through your expenses and income in more detail.
Pension Guidance and Advice
We strongly recommend that you seek guidance from the Government’s free and impartial service Pension Wise.
Find out more about guidance or advice
Remember, it’s important to shop around and get as much guidance and advice as you need before you make any decisions on what is best for you. Other providers may have more appropriate products or be able to offer a higher level of retirement income.
We've done our best to avoid complex jargon but take a look at our jargon buster if you need more explanation on any terms we use.