What your budget might look like in retirement

What your budget might look like in retirement

Swapping a salary for a pension usually means a drop in income. But drawing up a budget of how you might manage when you stop work can be an important part of your retirement planning.

Written by Abigail Montrose on 17 June 2013

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Retirement budgeting

Your main source of income in retirement is likely to switch from a salary to any pensions you are entitled to (such as private, occupational or state pensions) and income from any savings and investments you have.

Also, an increasing number of people now do some form of paid work in retirement. This can be working part-time or on an ad hoc basis to help boost their income.

Your retirement income might also be boosted by certain age-related state benefits such as Pension Credit if your income is low, the Winter Fuel Payment, a free bus pass, free NHS prescriptions and sight tests from age 60, and a free TV licence from age 75. 

Household bills

Your household bills are likely to increase if you spend more time at home. For example, your electricity and gas bills might go up if you have to keep your house warmer for longer periods. To make sure you're getting the best deal on your fuel bills see our guide on cutting energy bills

While your bills might go up, you might be able to make savings elsewhere. Not being at work may mean saving on expensive coffees, lunches out and work clothes.

More time on your hands might also mean you can do more around the home. When you were working you might have paid for help with cleaning, gardening, decorating and general maintenance. Once you are retired you might want to do more of these things yourself.

You can create your own budget in MoneyVista. In the Retirement area you can then go on to see how your budget might change in retirement.

Financial products

If you've been saving specifically for retirement you might now reduce or stop these contributions and reap the rewards. You might have paid off any mortgage on your home and you may no longer need certain insurance cover such as income protection.

But you're still likely to need some insurance such as for your home and car (if you have one). You might also want to replace any insurance you received as part of a benefits package at work such as life cover and health insurance.

Some insurance cover may be cheaper as you get older such as home insurance. But others become more expensive such as car, life and private medical cover. And you may even have problems getting certain types of cover. For example, some of the most competitive travel insurance policies have an upper age limit of 65.

Some insurers specialise in insurance for older people but you need to compare their prices with other insurers as you might find a better deal elsewhere. 

Travel and motoring

Travel costs might go down if you no longer have to commute to work. But if you had a company car you may now want to replace this and you might have to arrange and pay for your own car insurance.

You might also find you use a car more often now that you have more free time. But if you use public transport you will be able to use your free bus pass. 


One of the biggest joys of retirement is having more time to pursue your hobbies and interests. Depending on what you enjoy doing you may find your spending on leisure pursuits increases. But many hobbies are free and there are often special deals for older people to help keep costs down.


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