Our simple guide to retirement
Last updated 2nd April 2024
13 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 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
Retirement basics
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:
How long will my retirement be?
On average, a 65-year-old man can expect to live until age 83. A 65-year-old woman can expect to live until she's 85[1].
But no one can really predict how long they'll live. For many, retirement can last over 20 years[2]. 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.
How much money will I need?
In 2024/5, the basic State Pension is £169.50 per week, and the full State Pension is £221.20. (You generally need to pay National Insurance contributions for 35 years to get the full State Pension).
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 to retire 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:
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, 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
Inflation is when prices rise over time. For example, 20 years ago a loaf of bread cost 63p. Today a loaf will set you back £1.37[4].
Any money you put aside for retirement will need to keep up with inflation. This is especially true 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 – 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
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 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 to do this.) This is insurance that guarantees you a regular income for life, no matter how long you live.
Flexible income
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. If it falls in value, you may have to reduce how much you take out for it to last. (Just like your personal savings and investments.)
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 groceries, household payments, and fuel and transport[5].
Our latest Life Well Spent report also shows that retirees are spending more on the weekly shop and fuel compared to previous years. Plus, over 1 in 5 are spending more on holidays, and on gifts to children or 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?
Our 2023 Life Well Spent report reveals that retiring often improves happiness in both the long and short term. Many say this is because they have freedom to do what they want now they're retired. Plus they have more time for travel, and can spend more energy on their hobbies.
But some people say they miss socialising at work and feel like they have less purpose. And retirement can also come with financial worries. According to one of our 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(www.pensionwise.gov.uk opens in a new tab) is a government service that gives you a free appointment to talk about your options. And you can read our retirement planning checklist for more ideas ideas on how to prepare 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. (Just be aware that any extra income could affect how much tax you need to pay.)
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 buy to see if there are savings for people over 50.
In our Life Well Spent report, we asked people what they're spending less on to save money. The top answers are:
- Get fewer takeaways
- Don't eat out as often
- Cut back on activities and days out
- Don't spend as much on clothes
Mental health and wellbeing in retirement
When it comes to the over 50s, happiness appears to rise both with age and upon retirement. In fact, over half of over 70s and almost half of retirees say they’re very happy. When we asked what makes them so happy, they said:
- Family and friends
- Health
- Money
- A hobby or sport
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. 1 in 4 older people deal with common mental health problems[7]. Here are a few things you can do to look after your mental health and wellbeing when you're retired:
- Talk it out
- Keep active
- Eat well
- Get some sleep
- Stay social
- Challenge yourself
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. And cutting down on sugary, processed foods is great for your brain and your gut.
If you're having trouble sleeping, try cutting out the coffee and tea after early morning. A calm bedtime routine that avoids TV and mobile phones can also help.
Being with friends and family can reduce the risk of health problems such as depression[6]. 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.
Good to know: You can read our guide to talking about mental health if you or someone you know is struggling.
About SunLife
Retired or retiring soon? SunLife can give you peace of mind with affordable over 50s life insurance. It's a simple way to guarantee your loved ones money when they need it most. Plus, our equity release could help you release tax-free cash from your home.
Sources
[1] Office for National Statistics (2022), National life tables – life expectancy in the UK: 2020 to 2022(www.ons.gov.uk opens in a new tab)
[2] MoneyHelper (2023), How long might your money need to last in retirement?(www.moneyhelper.org.uk opens in a new tab)
[3] standardlife.co.uk (2023), Changes to your pension – what you need to know(www.standardlife.co.uk opens in a new tab)
[4] Office for National Statistics (2024), RPI: Ave price – Bread: white loaf, sliced, 800g(www.ons.gov.uk opens in a new tab)
[5] Which? (2023), How much will you need to retire?(www.which.co.uk opens in a new tab)
[6] Forbes (2023), 7 ways to be happier when you retire(www.forbes.com opens in a new tab)
[6] Age UK (2019), Mental health in older people (PDF)(PDF downloads)
The thoughts and opinions expressed in the page are those of the authors, intended to be informative, and do not necessarily reflect the official policy or position of SunLife. See our Terms of Use for more info.