Money and Retirement

In retirement we have money coming in from our state retirement pension, occupational or personal pension, savings, investments, paid work.

There are many younger people who seek financial independence to retire early (Fire) and this is to have autonomy to do what they want.

We all need enough money to pay our bills but most of us want more than a basic lifestyle. We want to be able to drive a car (unless we live in a large city), have a holiday, meals out. But how much do we actually need?

I work with clients whose yearly salary is well into six figures but feel there is not enough, and others whose income is low but they are content. Some are driven by events from childhood and the need for security, others continually compare themselves to their contemporaries.

Occupational and Personal Pension

Fewer and fewer people have a defined benefit pension. For those that do, and have worked for many years with the same organisation, they are likely to have a comfortable retirement with often a pension of 50 percent of their salary.

More people however are on defined contribution, with less certainty. With auto-enrolment, the Government has been encouraging people to start a pension, such as via NEST or you may have created your own, but for many this will only add a small addition to the state pension. ?There are options to how you take your pension pot, which I’ll leave for you to discuss with financial organisations and to review the information on the Money Helper website.

And do check if you have any ‘lost pensions’ from previous jobs. The Money Helper website explains how to find out more.

State Pension

This is a popular session on the pre-retirement seminars I run. It’s useful to find out both when you will retire, to check your national insurance contributions and to find out how much your pension will be. I’ve been checking mine regularly just to make sure, as many of us were contracted out for years.

The earliest age you can start receiving your pension depends on the date of your birth. For people reaching State Pension age now this is age 66 for both men and women while for those born after April 5, 1960, there will be a phased increase in State Pension age to 67, and eventually 68 for people born later.

Currently the full state pension is ￡185.15 a week, usually paid every 4 weeks. You have to claim your pension, about 3 months beforehand but we also have a choice, we can defer it by a year or more gaining 1% for every nine weeks we defer, which is just under 5.8% over a year, increasing our pension by ￡10.70 per week. But it is a gamble, isn’t it – we just don’t know how long we will live. Should I postpone? Will you? I’m interested in people’s views on this. ??

Property Rich, Cash Poor

I’ve started noticing more and more ads for property income release, focused in a different way than ten or more years ago; you take out some money from your house and either pay interest only or it comes out of the value of your home when you die. Whether, or not this is for you demands careful consideration beyond a talk with the company suggesting it. ?

Retirement Living Standards

These are reviewed regularly to ensure they are in line with changes in expectations of what people need and the rising cost of goods and services. As I go to press, the cost of a minimum lifestyle increased from ￡10,900 to ￡12,800 – or 18 percent – for a single person and from ￡16,700 to ￡19,900 – or 19 percent – for a couple.?This includes ￡96 for a couple’s weekly food shop, a week’s holiday in the UK, eating out about once a month, and some affordable leisure activities about twice a week.?It does not include running a car.

A moderate retirement income is now ￡23,300 for a single retiree and ￡34,000 for a couple. This includes spending ￡127 on a weekly shop, a 2-week holiday in Europe and to eat out a few times a month. For a comfortable lifestyle, in retirement, you need an annual joint income of more than ￡54,000 which will give you ￡238 a week for a food shop, regular beauty treatments, trips to the theatre and three weeks holiday in Europe. These examples assume we are mortgage free. If you are renting, or continue to pay a mortgage you will need more than this although there are also state benefits available too. For example, Pension Credit is payable to top up a pensioners’ income to a guaranteed minimum level, and worth checking out your eligibility as many people entitled to Pension Credit don’t claim it. There is also help with housing, council tax, and heating.

Alternatives Ways of Raising Money

I’ve got a substantial chapter (in my forthcoming book) around work, and as the Government is seeking more older people back into work, we should be able to get a job if we want to and part-time working can meet many of our needs in addition to financial. ?You could also consider downsizing, and most importantly, make sure you are getting all the state benefits you are entitled to. ?Don’t forget you currently stop paying National Insurance contributions once you hit state retirement age.

… And Spending Less

When I look back on how much I was spending on holidays … I was travelling business class and going away for at least 4 weeks and often longer. I’ve had amazing experiences and adventures, but lockdown and buying a wood led to changes. Now I’m less interested in travelling the world and more interested in understanding me more. I’m selling possessions, recently selling my vinyl collection and I buy less. Looking at the data behind having a comfortable retirement it allowed for ￡1300 to be spent on clothes. Looking back over the past year I’ve spent nothing like that but I have bought a chainsaw, wood to make birdboxes and other things for our woodland basecamp. All will last for years. ??

We will all retire, we all will need to make financial decisions and I’m very interested to read about your choices, and perhaps any regrets.?

Dr Denise Taylor is a Chartered Psychologist and Vision Quest Guide, specialising in retirement transitions and elderhood. Regularly featured in the media, she is the author of 8 books including Find Work at 50+ and Now You've Been Shortlisted.

My next book – Rethink Retirement will be published later this year

• Award winning retirement coach with Amazing People
• Working with people at 50+ - The 50 Plus Coach
• Finding meaning and nature based retreats – see Denise Taylor website