How to make your money grow after retirement: Smart investment tips

This content was reviewed and approved by Tamlin Russell.

Why your money still needs to grow in retirement

Although retirement often involves moving from saving into spending, many retirees still need their money to grow.

One reason is inflation. Over time, the cost of everyday goods and services can increase, reducing the purchasing power of your savings. What seems like a comfortable retirement income today may not stretch as far in 10 or 20 years' time.

Retirement is also lasting longer than it once did. Depending on when you retire and your personal circumstances, your savings may need to support you for several decades.

Maintaining some level of growth potential within your retirement savings could help preserve your spending power and provide greater financial flexibility throughout retirement.

Types of investments to consider in retirement

There is no single investment approach that suits everyone in retirement. The right retirement option will depend on your financial goals, retirement income needs and capacity for risk.

Here are some of the most common options retirees may consider.

Cash savings accounts

Cash savings accounts can provide security and easy access to your money, making them useful for emergency funds and short-term spending needs.

While cash can help protect against market volatility, interest rates may not always keep pace with inflation over the long term.

Stocks and Shares ISAs

A Stocks and Shares ISA allows you to invest in a range of assets while any growth or income generated within the ISA remains free from UK Income Tax and Capital Gains Tax.

ISAs can be a useful way to invest money outside of a pension and may form part of a wider retirement strategy.

Investment funds

Investment funds pool money from multiple investors and spread it across a range of investments.

Depending on the fund, this may include shares, bonds, property investments or a combination of different asset types. Many retirees use funds as a way of accessing diversification through a single investment.

Bonds and fixed-income investments

Bonds are loans made to governments or companies in return for regular interest payments and the return of the original investment at maturity.

While bonds are generally considered lower risk than shares, they can still fall in value and are not risk free.

Pension drawdown investments

With pension drawdown, some or all of your pension savings remain invested while you withdraw money as needed.

This allows your pension pot to retain exposure to potential investment growth, although the value of investments can rise and fall and there is a risk of running out of money if withdrawals are not managed carefully.

Savings and investment tips to help your money grow in retirement

When it comes to savings and investments, there are many different ways to help grow your pot. Even some of the smallest mindset changes can help keep you on the right track.

Here are some tips to consider when growing your money in retirement.

Consider whether your savings are keeping pace with inflation

Inflation can gradually reduce the value of your money in real terms. Even if the balance in your savings account remains the same, rising prices may mean it buys less in the future.

While cash savings provide security and easy access to funds, interest rates may not always keep pace with inflation over the long term.

Some retirees choose to keep a portion of their money invested in assets that have the potential to generate higher returns than cash over longer periods. However, investment returns are not guaranteed and the value of investments can fall as well as rise.

Avoid holding all your retirement savings in cash

Cash can play an important role in retirement planning, particularly for emergency expenses and short-term spending needs.

However, keeping all of your retirement savings in cash may reduce opportunities for potential long-term growth.

Some people choose to hold a mix of cash and investments, allowing them to maintain access to money they may need in the near future while keeping other savings invested for longer-term goals.

The right balance will depend on your individual circumstances and financial objectives.

Diversify your investments

Diversification means spreading your money across different types of investments rather than relying on a single asset or market.

This could include a combination of:

• Cash savings 
  
• Bonds 
  
• Shares 
  
• Investment funds 
  
• Property-related investments 

Different investments often perform differently depending on economic conditions and market movements.

While diversification cannot eliminate investment risk, it may help reduce the impact of poor performance from any single investment or sector.

Consider investment funds for built-in diversification

Investment funds allow you to invest in a range of assets through a single investment.

Many funds spread investments across different companies, industries, regions and asset classes, helping to provide diversification.

Some retirees may prefer investment funds because they offer professional management and can make it easier to access a diversified portfolio without selecting individual investments themselves.

If you're considering investing, you may find it helpful to learn more about LV='s pension investment options and retirement planning support.

Review your pension drawdown investments regularly

If you're using pension drawdown, some or all of your pension savings may remain invested while you withdraw an income.

Regular reviews can help ensure your investments continue to align with your retirement goals, income requirements and capacity for risk.

Market conditions, personal circumstances and spending needs can all change over time. Reviewing your investments periodically may help you decide whether your current approach remains appropriate.

Balance growth opportunities with your capacity for risk

Every investment involves some level of risk.

Generally speaking, investments with greater growth potential may also experience larger fluctuations in value. Investments with lower levels of risk may offer greater stability but could provide lower growth opportunities over time.

Understanding your capacity for risk means considering how much loss you could afford financially, as well as how comfortable you are with changes in the value of your investments.

Factors that may influence your capacity for risk include:

• Your age 
  
• Retirement income needs 
  
• Other sources of income 
  
• Health and life expectancy 
  
• Existing savings and investments 

What works for one person may not be suitable for another.

Keep a long-term perspective

Although retirement may feel like a new chapter, many retirees still have a long investment horizon.

For example, someone retiring at 65 could potentially spend 20 to 30 years in retirement. Money that isn't needed immediately may therefore have time to remain invested and potentially benefit from long-term market growth.

Investment markets can experience periods of volatility, and short-term fluctuations are normal. Making decisions based solely on temporary market movements may not always support long-term financial goals.

Past performance is not a reliable indicator of future results, and investments can fall as well as rise in value.

Consider tax-efficient ways to invest

Making use of tax-efficient savings and investment products may help improve the overall effectiveness of your retirement planning.

Depending on your circumstances, options such as the following, may offer certain tax advantages:

• Stocks and Shares ISAs 
  
• Pension investments 
  
• Pension drawdown arrangements

Tax rules can change and depend on individual circumstances, so you may wish to seek professional financial advice before making decisions.

Common mistakes to avoid

While everyone's retirement journey is different, some common mistakes can make it more difficult for savings to support long-term goals.

These include:

• Holding all savings in cash for long periods.
  
• Taking more investment risk than your circumstances allow.
  
• Failing to diversify investments.
  
• Ignoring the impact of inflation.
  
• Not reviewing investments regularly.
  
• Withdrawing pension income without considering long-term sustainability.

Taking time to review your plans periodically may help you stay aligned with your retirement objectives.

When to seek financial advice

Managing retirement savings can involve important decisions around investments, withdrawals, taxation and estate planning.

Professional financial advice may help you understand the options available and create a plan tailored to your circumstances.

Advice can be particularly valuable if:

• You're approaching retirement.
  
• You're considering pension drawdown.
  
• You have multiple pension pots.
  
• You're unsure about your capacity for risk.
  
• You want to create a sustainable retirement income plan.

How LV= can help

Whether you're approaching retirement or already enjoying it, having a clear plan for your savings can help you feel more confident about the future.

LV= offers a range of retirement planning resources, pension support and financial guidance to help you understand your options. From pension drawdown information to ISAs, retirement advice and planning tools, we can help you make informed decisions about your retirement finances.

Explore our retirement guides, pension options and retirement advice services to learn more.

Growing money after retirement FAQs

Making the most of your money is no easy feat; it’s also quite confusing for a lot of people. That’s why we’ve answered some of the most commonly-asked questions about growing your money after retirement.

Can your money still grow after retirement?

Yes, depending on how your savings are held. Some retirees keep a portion of their money invested, which may provide opportunities for growth over time. However, investment returns are not guaranteed and investments can fall as well as rise in value.

Is it worth investing after retirement?

Some people choose to continue investing after retirement to help combat inflation and support long-term financial goals. Whether investing is appropriate depends on your circumstances, objectives and capacity for risk.

How can I protect my retirement savings from inflation?

Diversification, maintaining some exposure to investments and regularly reviewing your financial plan may help reduce the impact inflation has on your spending power over time.

Should I keep all my retirement savings in cash?

Cash can be useful for short-term spending and emergencies, but holding all of your retirement savings in cash may limit opportunities for long-term growth and may not keep pace with inflation.

What is capacity for risk?

Capacity for risk refers to the amount of financial loss you could afford to take without significantly affecting your lifestyle or future plans. It is an important consideration when making investment decisions.

Should I seek financial advice in retirement?

Financial advice may be beneficial if you're making decisions about pension withdrawals, investments, tax planning or long-term retirement income strategies.