Article How to plan your retirement transition

As much as living longer presents new opportunities for us all to embrace – it does also come with its challenges. We need to adapt to a new way of living, prepare for potentially more changes, which naturally can bring uncertainty, and perhaps most importantly – make sure we have enough money to cover those later years.

Retirement can feel like a strange concept – going from working every day to this newfound freedom and the endless pot of opportunity at your feet. This change might be welcome for some, but it can be a strange feeling for those who have dedicated their lives to a routine.

Some people are taking a different approach to life, embracing what’s known as a multi-stage life, where retirement might not begin at 65. Instead, it could be choosing to work for longer, volunteering or caring for grandchildren.

1. Knowing your retirement date
2. Understanding your pension options
3. Plan for healthcare and long-term care 
4. Minimise debt 
5. Be tax efficient  
6. Create a detailed retirement budget
7. Make retirement goals
8. Create a daily routine

Knowing your retirement date

Have you thought about when you might like to retire? Currently, you can take money from your private pension from age 55, although this will increase to 57 from 6 April 2028, known as the normal minimum pension age (NMPA).¹

It’s possible to ‘retire’ before this, but it would need to be funded through your personal savings and investments unless you have a Protected Pension Age (PPA) that lets you take benefits before 55. Until you reach the NMPA, you’re unable to take benefits from your private pension.

Another thing you’ll need to think about is if you have enough money to retire. In the years leading up to your retirement, you should check whether you’re on track with your retirement goals and if the money you have lines up with what you think you’ll need to live comfortably. 

Understanding your pension options

As you edge closer to retirement, check your financial position. You'll need to know where your retirement pots are, when you can access them and how much income they'll provide you.

The Government offers a State Pension to qualifying people. At present, the State Pension age is 66, but this will increase to 67 between 2026 and 2028, with a further increase to 68 by 2044 to 2046. However, a review in the next two years proposes changing this to between 2037 and 2039.

You'll need to check your State Pension and see if you qualify for the full amount. To be eligible for the full new State Pension, you must have paid a minimum of 35 years of National Insurance contributions.

The current full rate to receive from the new State Pension is £221.20 a week and is pro-rated for those who don't qualify.² To qualify for a year of National Insurance contributions, you must've worked and paid NI contributions, received NI credits for unemployment, illness, parenthood/caring, or paid voluntary NI contributions.

You can make additional National Insurance contributions if you haven't paid the minimum. Check your State Pension forecast to find out what you'll receive or if you need to pay more.

Plan for healthcare and long-term care

Our 'Second 50' research found that 79% of the 1,000 surveyed respondents were somewhat or very concerned about their health in older ages. This rose to 82% for those aged 50+. It was also found that women (82%) are more likely to be concerned about their health than men (75%). Despite these high figures, only 22% of the survey respondents factored social care expenses into their retirement savings.³

While we’re fortunate to have the NHS in the UK, not all costs are covered. Services like dental care, optical care and prescriptions need to be paid for unless you’re exempt or depending on which country you live in the UK. As people become older, they often need these services more. There might be ways to reduce these costs, such as private health care and a prescription prepayment certificate (PPC).

Minimise debt

Do you have debt? Before you retire, you’ll probably want to try paying off any outstanding debt to help meet your financial goals. This could be anything from your mortgage to credit cards or personal loans.

Debts often have high interest rates and can quickly eat into your savings. Clearing your debt before you retire could help make sure you’re living comfortably and without financial worry, potentially allowing you to be more flexible with your money in retirement.

This information is not intended to be financial advice – what’s right for you will depend on your personal circumstances. If you’re unsure about your finances in any way, it's recommended to seek financial assistance. MoneyHelper a government-backed service, provides free and impartial guidance to help clarify your money and pension choices. They have a range of guides on dealing with debt that might be helpful if you need extra support.

Be tax efficient

Even though you might not be working, you could still face tax implications from your retirement income, whether from your pension, savings or investments. It’s essential to determine how much you’ll be paying and how to reduce this amount.

Like with income from your job, pensions are subject to income tax, but you’ll still be entitled to the Personal Allowance on your retirement income. The Personal Allowance figure for 2024/25 is £12,570, this is the amount of income you don’t have to pay tax on.⁴

If you want to find out how best to optimise your tax situation, consider speaking to a financial adviser. You can find a financial adviser through MoneyHelper. There’s likely to be a charge for financial advice.

Create a detailed retirement budget

Before entering your retirement years, it might be wise to have a clear understanding of your expenses and how much they’ll cost you per month. This could be especially helpful where you own your home and have mortgage payments to cover. Depending on how much you have left, paying these off ahead of time might be beneficial. 

Each person’s monthly outgoings will be different, but people typically consider things like rent or mortgage payments, food, transportation, holidays and leisure, clothing and personal items, and helping others. Don’t forget to consider leaving room for the things that bring you purpose or a sense of joy, as these expenses are just as meaningful.

How much you need on an annual basis to get by in retirement entirely depends on your personal circumstances, but research from The Pensions and Lifetime Savings Association found to live a certain level of lifestyle in retirement, a single person would need £14,400 to live a minimum retirement lifestyle, £31,300 for a moderate and £43,100 for a comfortable retirement lifestyle. The figures slightly differ for couples.⁵

You can then align your budget with any income you’ll receive, such as the State Pension, private pension, savings, and investments. If you plan to work part-time during your retirement, take this income into account, too.

Remember, the value of an investment can fall as well as rise and isn’t guaranteed. The value of your pension pot when you come to take benefits may be less than has been paid in. It’s also worthwhile to keep inflation in mind as things might be more expensive when you come to retire.

Make retirement goals

You've spent decades working hard for this point in your life, and now it's entirely up to you to decide what you’d like to do with your time and hard-earned money. Perhaps there's a hobby you've been interested in starting or a country, or several, that you've always wanted to visit. Now's the time to do it. Think hard about what you’d like to do and get out of this free time and make a list of goals to check off. 

Check out our Financial Wellbeing Index for more ways to understand your circumstances and develop a personalised plan.

Create a daily routine

When we work, it can be easy to fall into a routine that we stick to day in and day out. Staying with a routine can be challenging without a job to wake up for.

Set a consistent sleeping schedule so you go to bed and wake up at the same time every day. You could incorporate other daily habits into your routine, like going for a morning walk or reading a book.

There is evidence that day-to-day routines can support mental health, reducing stress build-up, provide structure and rhythm to your life and can help with symptoms of anxiety and depression.⁶

Build your financially resilient retirement today

Retirement is something many of us dream about, but it can become overwhelming as you get closer. By taking steps to prepare today, you can help make sure you have the foundations in place to live a long, happy, financially resilient retirement – giving you peace of mind from the get-go.

Check out our Money tips section for more tips on a financially resilient retirement.