Planning for retirement is never too early, and it’s never too late to refine your approach. Whether retirement is just around the corner or still years away, taking the time to get clear on your retirement goals now can set you on the path to a fulfilling and secure future.
Unfortunately, many individuals in the UK are falling behind in their retirement savings. According to a recent Department for Work and Pensions (DWP) study, 38% of working-age Brits are undersaving for retirement, amounting to around 12.5 million people. This highlights the importance of planning ahead and taking the right steps now.
Retirement planning isn’t just about the numbers—it’s about creating a life that feels rewarding, secure, and fulfilling. Here’s a retirement checklist to help guide your planning and ensure that you’re ready to retire with confidence.
1. Visualize the Retirement You Want
Before delving into your financials, think about what life after work looks like for you. Do you want to fully stop working, ease into retirement gradually, or pursue other endeavors like consulting, starting a passion project, or volunteering? The clearer your vision, the easier it will be to build a financial plan that supports your goals.
Retirement is no longer a single event—it’s a transition to a new lifestyle. Many under-35s, for example, expect to semi-retire rather than quit working altogether. Defining your retirement vision early on will help you make smarter financial decisions as you move forward.
2. Get Clear on Future Spending
Now that you’ve imagined the life you want, consider what it will cost. In retirement, your spending habits may shift—you may spend less on work-related expenses like commuting or office attire, but more on travel, hobbies, or time with family. Be realistic about your future needs.
Start by considering:
- Essential costs – housing, utilities, food, transport, insurance
- Lifestyle spending – travel, dining, entertainment, hobbies
Think ahead: Do you need private healthcare or assistance later in life? Do you want to support family members or charitable causes? Creating a rough estimate of your future expenses will give you a clearer picture of the amount you’ll need in retirement.
3. Map Out Your Income Sources
Once you have a sense of your future spending, it’s time to assess your income streams. Review your State Pension forecast to see how much you’ll receive and when. Check your workplace pensions, personal pensions, and any lost pensions you may have accumulated over the years. If you’ve moved jobs or homes, use the Pension Tracing Service to track them down.
Also, consider other assets such as:
- ISAs, savings, or investments
- Rental income or business revenue
- Potential plans to downsize or sell assets
It’s important to understand where your income will come from to ensure you have enough to cover your retirement expenses. Financial advice can be crucial here, particularly for high earners or business owners with complex pension plans.
4. Reduce Your Debt
Paying off high-interest debts before you retire will free up more of your income for savings and living expenses. Prioritize paying down:
- Credit cards and overdrafts
- Personal loans
- Mortgage balances
Before you retire, review whether overpaying your mortgage will save on interest. Consider using lump sums to reduce your debt, but always seek professional advice first. This will help ensure your retirement income is not tied up in debt payments.
5. Know Your Pension Access Options
For those with defined contribution pensions, you can typically access your funds at age 55 (rising to 57 in 2028). Understanding how you draw your pension is critical—it affects both the longevity of your savings and the taxes you’ll pay.
Your options include:
- Drawdown – keep your pension invested and withdraw income flexibly
- Annuities – convert your pension into a guaranteed income for life
- Lump sum withdrawals – take all or part of your pension, with 25% tax-free
Evaluate your options carefully and consult a financial adviser to ensure you’re making the most tax-efficient decisions for your retirement.
6. Consider a Phased Retirement
Not everyone transitions from full-time work to full retirement overnight. Phased retirement—where you reduce your hours or take on part-time work while drawing from your pension—can help you ease into retirement gradually. This strategy allows you to stretch your savings, maintain purpose, and avoid an abrupt change in lifestyle.
If you’re considering semi-retirement, it’s essential to model the financial implications and understand how this gradual transition will affect your savings and income.
7. Review Your Investment Strategy
As retirement approaches, revisit your investment strategy to ensure your portfolio aligns with your goals. You’ll want to strike a balance between growth and defensive assets, especially if your retirement could last for decades. Review your asset allocation and make adjustments to reflect your retirement income needs and time horizon.
Regular reviews will help keep your investments on track as your retirement draws nearer.
8. Plan Your Monthly Cash Flow
Managing cash flow becomes more critical in retirement. Since you’ll be relying on a variety of income sources, having a clear plan for how money flows in and out will help you stay on track. Align your income sources with your spending patterns and plan for annual costs like insurance renewals or holidays.
Consider using budgeting apps to keep track of your spending and ensure you have enough to cover one-off expenses. Reviewing your plan annually or after significant life changes will help you stay flexible and avoid surprises.
9. Prepare Emotionally
The transition into retirement can be as emotional as it is financial. After years of structure and routine, leaving the workforce can create a sense of loss. Maintaining a sense of purpose and staying socially connected are key to a happy retirement.
Consider how you’ll stay engaged—through social groups, volunteering, or pursuing long-delayed hobbies. Emotional well-being is just as important as financial security in retirement, so plan for both.
10. Review Your Estate Plan
Retirement is the perfect time to ensure your estate plan is in order. This includes:
- Writing or updating your will
- Appointing a lasting power of attorney (LPA) for health and finances
- Reviewing beneficiaries on pensions and policies
- Exploring inheritance tax strategies to maximize what you pass on
A well-structured estate plan can help ensure that your wealth is protected and passed on according to your wishes.
By following these ten steps, you’ll be able to retire with confidence and a clear roadmap to the lifestyle you’ve envisioned. Take action now to ensure you’re financially and emotionally prepared for the next stage of life.