Before you get too carried away thinking about tomorrow, today is a good to tackle some of the practical details you may be faced with in your retirement, such as making a budget that takes your new living situation into account.
The run up to retirement can be exciting and emotional, and you’ll probably have plenty of plans for the things you want to do. But before you get too carried away thinking about tomorrow, today is a good to tackle some of the practical details you may be faced with in your retirement, such as making a budget that takes your new living situation into account.
While it might seem daunting, taking time to work out your monthly spending can help you plan a lifestyle you can afford and give you peace of mind over your everyday spending. Plus, it’s important to make sure you take other steps to ensure you’re not missing out on vital sources of income and savings when you retire.
Retiring means you’ll be on a fixed income and although this may be lower than the salary you are currently on, making a budget will help you work out what you need for everyday spending and how much you could have left over. This will help you when it comes to planning the fun stuff like holidays, home improvements, or spending time with children and grandchildren.
If you have debts, read our guide on how to manage your debts in retirement and if you think you might be on a low income, it’s a good idea to find out whether you may be entitled to some benefits.
There are plenty of tools available to help you make a budget, including the Government’s Moneyhelper’s budget planner. Once you’ve worked out what money you need for essentials, you’ll be able to see if you have anything left over for longer-term plans. Essentials including things like energy bills, council tax, housing costs and food bills – plus you can also include any nice-to-haves you would like to keep, such as streaming subscriptions and gym memberships.
Even though you’ve made a budget you should keep an eye on your expenses. If you’re a few years off retirement you might want to do the Moneyhelper Midlife MOT to help you plan ahead.
If you have money left over each month then you might want to consider putting some of it in a savings account. Here, it can earn interest and help you beat inflation - but you will need to keep an eye on your savings too as interest rates can change.
Cash savings
You can put up to £20,000 a year in an Individual savings account (ISA), where your money can grow tax-free. Alternatively, you can choose from a deposit account with a bank or building society. You may be able to get a better rate of interest if you can leave your money in the account for a few months or years. Online comparison sites like Moneyfacts regularly update tables comparing the best savings accounts, so you can more easily find the right one for you.
Investments
You can use your ISA allowance to invest in the stock market. Stock market investments, such as shares, can be a great way to maximise returns on your investment. However, as with any investment, the value can go down as well as up so you should make sure that you fully understand the risks of investing in stocks and shares, and that you can afford to lose any money you might lose.
You may have money invested or saved which you have lost track of. The Pension Tracing Service can help you track down any pension schemes you may have lost. You can also look for lost bank accounts via My Lost Account.
If you are able to, taking steps to make your home more energy efficient is a good plan, because this can also help you reduce your monthly energy bills for years to come. The UK Government offers energy grants to support this and energy companies also offer extra help including winter fuel payments, the warm house discount and cold weather payments. Find out more about help with your energy bills here.
If you’re over the age of 60, you can get cheaper bus and train travel. Some areas of the UK offer free bus passes and Transport for London offers the Freedom Pass, which provides discounted or cheap off-peak travel for over 60s. You may also benefit from other savings such as cheaper gym membership, so make sure you check for any other savings you might be entitled to.
If you are not planning on giving up work entirely when you retire, there may be other ways to bring in some extra income each month:
Scammers are on the rise and will often target savers who have retired. If you get a phone call, email or text that seems too good to be true then it probably is. Scammers are getting increasingly sophisticated but there are certain precautions you can take to avoid falling victim to them. If you get a call from your bank or building society, they will never ask for your login details. If you are called and given a number to call back, make sure you double-check the number you are given is the correct one for your bank. You can find out more from the Financial Services Authority on how to protect yourself from scams here.