Calculating your monthly budget in retirement can be a difficult process, but understanding your costs can help you better plan your finances.
Review your current outgoings
Firstly, it's time to review your current spending habits, and categorise them accordingly.
Essential expenses
- Food and household shopping
- Mortgage and rent payments
- Health related costs
- Household utility bills
- Insurance costs
Optional expenses
- Eating out
- Holidays and day trips
- Hobbies such as gardening or sports
- Pets
- Running a car
Adjust your outgoings for your retirement
Calculate your pension income
Check if you're eligible for the State Pension
The state pension currently pays up to £175.20 per week (2020/21) for people retiring on or after 6th April 2016. This is available once you reach your retirement age, but you'll need to meet the eligibility criteria.
Boost your income
Things to consider
Life expectancy and inflation
It’s important to consider how long your retirement might last and the impact inflation may have on your income:
- A male aged 65 can expect to live on average 18.5 years; a woman over 20.9 years. [1]
- At 3% per annum inflation, the value of your money almost halves over 20 years.
The means you will probably need to use all your sources of income. These could include personal and company pensions, state pension, savings and investments (ISA's), equity in your home and other income such as inherited wealth to support you in retirement.
[1] ONS Statistical Bulletin (2014), Cohort life expectancy at age 65
Have we got you thinking?
Take a look at our other handy guides on pensions and retirement