Our simple guide to retirement
Last updated 4th April 2023
11 min read
Retirement can be daunting, so the more prepared you are the better.
To help, we've put together this guide on what you need to know before you retire.
Read on to find out what the best age to retire is, what pensions and income you might need, and how to make the most of your later years.
On this page
- Retirement basics
- Retirement stories: Dave and Carolynne
- Why retirement may cost more than you think
- The real cost of retirement
- How to prepare for retirement
- How to retire early
- Money-saving tips during retirement
- Mental health and wellbeing in retirement
How you plan your retirement and the retirement you want will differ from person to person. Here are some starting points to help you:
When should you retire?
Retirement age isn't fixed like it used to be. Generally, people are expected to retire around age 65.
But lots of people now choose to carry on working, often with part-time hours.
To work out the best age to retire for you, you'll need to know:
On average, a 65-year-old man can expect to live until age 83. A 65-year-old woman can expect to live until they're 86.
But no one can really predict how long they'll live. For many, retirement can last over 20 years. So it's better to overestimate how long your retirement will be.
A safe bet is to assume your retirement could last for 30 years or more.
This way, you can make sure you have a retirement plan and enough money to last you for life.
The 2023/24 state pension is £203.85 per week, but the amount you'll receive depends on your national insurance contributions.
This means you may need to rely on other means of income when you retire. Especially as where you live can affect how much you may need.
For example, retiring in a city might cost you thousands more than elsewhere in the UK.
How much you need will depend on a few things:
- The kind of lifestyle you want to lead
- Whether or not you'll be supporting anyone else financially
- If you have any debts you'll need to pay off
For example, will you want to go on lots of holidays, cover your child's university fees, or pay off your mortgage? If so, you'll need to include these costs in your retirement budget.
You'll also need to consider day-to-day expenses like household bills. They might be higher if you're spending more time at home.
And while you won't have work expenses anymore, you may want to spend more money on hobbies.
Find out more about how long your money will last in retirement.
Retirement stories: Dave and Carolynne
Where will your money come from?
Your income during retirement will probably come from one or more of these options:
In 2023/4, this comes to £203.85 a week, and it should rise with inflation over time.
You’ll be able to access it once you reach your state pension age(www.gov.uk opens in a new tab), as long as you are eligible for it.
These are any pensions you have with your current and old employers.
You can choose to take your company pension early. But this means you’ll probably get much less money than if you waited until your planned retirement age.
Make sure to trace your old pensions so you know exactly how much money you'll be getting when you retire.
This is any pension that you’ve arranged yourself. You can choose to make regular or lump-sum payments to a pension provider.
Just make sure they’re registered(www.gov.uk opens in a new tab) with the Financial Conduct Authority or the Pensions Regulator.
Important: When you're budgeting for retirement, don't forget your pensions are taxable. This will reduce how much money you get.
Why retirement may cost more than you think
With inflation and people living longer than ever, retirement may cost more than you think.
You'll need to make sure your pensions and other types of income will give you enough money to last your whole life.
Here's what you'll need to consider when planning your retirement:
Inflation is when prices rise over time.
For example, 20 years ago a loaf of bread cost 56p. Today a loaf will set you back £1.38.
Any money you put aside for retirement will need to keep up with inflation if you want to maintain your lifestyle.
Your state and work pensions should rise with inflation as a minimum.
Any personal savings or investments will need to be budgeted carefully if you want them to last for your whole retirement.
Remember that as costs increase with inflation, you may need to take larger daily allowances from these pots in years to come.
A good starting point is to work out how long you think your retirement will be.
Then make sure you'll have enough for essentials like food, bills and your home as a bare minimum.
Secure income simply means any money you're guaranteed for the rest of your life. Your state, work and personal pensions are secure incomes.
If you're worried that these may not be enough, you can use the pension pot from your work and personal pensions to buy a lifetime annuity. You'll need to seek professional advice in order to do so.
This is insurance that guarantees you a regular income for life, no matter how long you live.
If you're happy that you have enough secure income, you could use your pension pot as a flexible source of retirement income.
Your pension pot is the money put aside from your work and personal pensions. It includes any growth earned from your pension fund's investments.
You can choose to leave your pension pot invested and take lump sums or a flexible income as needed.
Doing this means your pension pot could grow in value – but it could also fall in value.
Like your personal savings and investments, if it falls in value you may have to reduce how much you take out for it to last.
The real cost of retirement
Day-to-day costs are what most of us worry about when we think about retirement.
But what really costs the most? And what's the emotional cost of retiring?
What costs the most?
The biggest costs in retirement are usually food and household bills such as gas, electricity and water.
Our Cost of Retirement Report 2021 also shows that 20% of retirees spend more money on certain things since retiring.
Over half of these people said they spent more on holidays.
While over a third spent more on garden or home improvements, and on their children and grandchildren.
Top tip: Is there anything you'd like to tick off your bucket list when you're retired? Or perhaps you'd like to spend a bit more on the day-to-day things?
If so, don't forget to take them into account when you're working out how much money you'll need for retirement.
What's the emotional cost?
In our Cost of Retirement Report 2021, 4 in 5 people say life is better since they retired.
Many say this is because they have more time for family, friends, hobbies, relaxing and holidays.
Most people are happy to leave work behind, but 4 in 5 say they miss it when they retire.
They mostly miss their colleagues and friends, plus the sense of purpose and routine that a job can give.
Retirement can also come with financial worries.
Many over 50s are worried about the rising cost of living. According to one of our recent surveys, over half of over 50s lose sleep over rising energy prices.
See how you can start saving more money today for your own retirement. SunLife also has a cost of living hub to help you feel in control of your money. And remember, there's help out there if you're feeling worried or stressed.
How to prepare for retirement
The thought of retiring can seem scary if you feel unprepared.
The good news is, there are things you can do that will really help in the years to come.
Here are some simple steps to help you make sure your retirement is as fulfilling as possible:
Where to begin
To get started with your retirement planning:
- Find out how much you have in pensions, savings and investments
- Check if and when you're eligible for the state pension(www.gov.uk opens in a new tab)
- Make sure your will is up to date
It may also help to look into the different types of pension and what they may mean for you.
Gov.uk(www.gov.uk opens in a new tab) is a good place to start.
Don't be afraid to ask for advice. Pensionwise is a government service that gives you a free appointment to talk about your options.
See our retirement planning checklist for more in-depth advice about preparing for the years ahead.
Set your goals
Once you know how much income you'll have, you can start to set yourself goals that will help you have a happy retirement.
Having something to work towards can be a great way to give yourself a sense of purpose later in life.
Is there a sport or hobby you've always wanted to try? If so, one of your goals could be to give it a go.
When we asked people what their priorities for retirement were, lots of them said their goals were to:
- Go on more holidays
- Spend more time in the garden
- See family and friends more
- Get fit
- Volunteer for a charity
Top tip: Whatever your goals, write them down and get friends and family involved. It will help keep you motivated and make achieving your goals even more rewarding.
Start saving today
Some of us may not have as much savings as we'd like for retirement.
But it's never too late to start saving for your later years.
One thing to remember is that you don't have to stop working at the 'normal' retirement age.
Lots of people choose to keep working, either full or part-time.
If you don't earn a lot, you can also check to see if you're eligible for benefits when you retire.
Another option is to earn spare cash to add to any pensions you have.
Perhaps you could rent out a spare room, run classes in something you're good at, or even be a film or TV extra.
Read our How to make money in retirement guide for tips on saving and starting your own business in retirement.
How to retire early
Do you find yourself dreaming of an early retirement? You're not alone.
The good news is, you don't have to have lots of money to make it happen.
But there are certain things you'll have to do to make early retirement possible:
- Pay off your debts and mortgage
Do this as early as you can to avoid interest building up.
You can choose to make overpayments on your mortgage to pay it off sooner. Just make sure there aren't any penalties for overpaying.
- Make sure you'll have enough to live on
Your pensions, savings and investments need to be enough to cover day-to-day costs when you're retired.
- Budget for life's little luxuries
Your money will also need to cover extras, such as holidays and eating out.
Hobbies, cars, travelling and moving house can all cost a lot of money.
Have a think about how you want to spend your time when you retire, and work this into your budget.
- Don't forget about emergencies
It's always a must to have money put aside for those unexpected twists and turns.
- Live within your means
If you want to retire early, it's important keep a close eye on your spending now.
Check your savings and pensions every year to make sure you're on track financially.
Money-saving tips during retirement
There are lots of ways to save money during retirement. Plus, there are plenty of discounts for over 50s in the UK, although for some you have to be over 60.
The best savings rates will depend on the type of discount you're looking for. It's always worth doing your research before you purchase to see if there are savings for people over 50.
In our Cost of Retirement research, we asked people over 50 for their money-saving tips. The top answers were:
- Save regularly
- Shop around for deals
- Spend wisely
Here are a few quick tips for freeing up cash, so you can make the most of the best years of your life:
See if you qualify for any insulation or heating schemes(www.ofgem.gov.uk opens in a new tab) that could save you money. And use switching services like Which? to find the cheapest prices for gas, electricity and Wi-Fi.
Websites often have special offers that you won’t find in-store. Some also give you a discount code when you sign up to their newsletter.
Make the most of your bus pass if you’re over 65 (or 60 if you live in Scotland, Wales, Northern Ireland and London), and enjoy discounts with the National Trust and English Heritage. For train journeys, see if you can get an senior rail card(www.senior-railcard.co.uk opens in a new tab), or similar discount.
Cancel any direct debits you don’t need any more – whether it’s that gym membership or magazine subscription.
Draw up a budget to track what you’re spending and saving. Sticking to it means you’ll know exactly where you stand financially.
Shop around for savings plans. Some providers may provide Cash ISAs or savings rates for over 50s or over 60s.
Mental health and wellbeing in retirement
Out of everyone over 50, people aged 65 are the happiest.
People in their 70s are also more likely to be happier. When we asked what makes them so happy, they said:
- Financial security
This shows that retirement can be a really happy time of life.
But retirement can also be challenging. After all, it's a big change. Perhaps you're suddenly on your own a lot more, or your new life seems to lack purpose.
This can lead to symptoms such as low mood, lack of appetite or trouble sleeping.
If you feel this way, don't worry – you're not alone. Over half of people over 55 deal with mental health problems at some point.
Here's a few things you can do to look after your mental health and wellbeing when you're retired:
Talk it out
Don't be afraid to talk about how you're feeling. Speak to a family member, a friend, or even your GP.
Any kind of exercise can help mood – especially if you do it regularly. Walking and gardening are good places to start.
YouTube also has lots of exercise videos that you can do in the house.
Eating lots of healthy food is important for your mental health. Vegetables, fruits and whole grains are a good place to start.
While cutting down on sugary, processed foods is great for your brain and your gut.
Get some sleep
If you're having trouble sleeping, try cutting out the coffee and tea during the day. A calm bedtime routine that avoids TV and mobile phones can also help.
Spending time with friends and family reduces the risk of lots of health problems, including depression. If you'd like to meet new friends, why not join a local club or class?
This doesn't have to be a big challenge. It can simply mean doing a crossword, or learning an instrument you've always wanted to play.
Read It's time to talk about mental health if you or someone you know is struggling with their mental health.
Retired or retiring soon? SunLife can give you peace of mind with affordable over 50s life insurance – helping you guarantee your loved ones money when they need it most. Plus, our equity release could help you release tax-free cash from your home – so you can have the retirement you deserve.
 Office for National Statistics (2021), National life tables – life expectancy in the UK: 2018 to 2020(www.ons.gov.uk opens in a new tab)
 MoneyHelper (2022), How long might your money need to last in retirement?(www.moneyhelper.org.uk opens in a new tab)
 standardlife.co.uk (2023), Changes to your pension – what you need to know(www.standardlife.co.uk opens in a new tab)
 Office for National Statistics (2023), RPI: Ave price – Bread: white loaf, sliced, 800g(www.ons.gov.uk opens in a new tab)
 Which? (2021), How much will you need to retire?(www.which.co.uk opens in a new tab)
 AARP (2020), 5 secrets to a happy retirement(www.aarp.org opens in a new tab)