Living costs in retirement

What will you have to spend money on in retirement? The answer will help you understand what your costs in retirement could be, and help you plan for your retirement. For example, will the income you expect to receive cover all your costs, or only the essentials?

Once you know what costs you’re likely to face, you can start to plan the decisions you need to make, or look for help or further guidance if you need it.

To get an idea of where your money needs to go, or your different types of income you can try categorising them. For example essential and non-essential costs, or guaranteed and variable incomes.

Your costs could include:

Example costs


Essential costs

Things that you need to have:

  • Food
  • Housing
  • Gas
  • Electricity
  • Water


Optional costs

Things that will make your retirement more enjoyable:

  • Holidays
  • Entertainment
  • Club membership
  • Hobbies and interests
  • Other

 Important costs

Things which though not essential, most people would consider critical:

  • Insurance
  • Clothing
  • Health care
  • Car maintenance
  • Any existing debts

 Occasional but major costs

Unforeseen or major items like replacing a fridge or helping children with a housing deposit:

  • Long-term care 
  • Help children with housing deposit
  • Major repairs to the home
  • New car or new home appliances
  • Other

Your income could include:

Income examples


Guaranteed income

Income that will be paid at regular intervals for the rest of your life, and might come from:

  • State Pension
  • Personal or stakeholder pensions
  • Company or occupational pensions
  • Income from an annuity
  • Other


Variable income

Known income that  may come as one off amounts: 

  • Unit trusts/investment bonds
  • Equities
  • ISAs
  • Property
  • Other

Reliable income

Income that could be used to cover important costs:

  • National Savings insurance bonds
  • Income from any ongoing employment
  • Other

Other sources of income

Income sources that you might not be aware of in advance, such as:

  • Equity release (for example, lifetime mortgages)
  • Inheritance
  • Premium bonds
  • Other

Where can I find more help about this?

If you need help, guidance or advice to understand your future financial situation or to answer any questions you have, we recommend you take advantage of the free and impartial guidance offered by  Pension Wise, or ask a financial adviser.

Your next steps

Or take a look at

Pension Options which looks at the different ways you can access your pension pot.