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When you retire, hopefully you’ll be able to spend more time doing the things you enjoy, but if you want to be certain you won’t run out of money too soon, it’s a good idea to adopt certain financial habits as part of your new routine.
You may be wondering whether you have enough to fund your retirement and cover steep living costs, so taking control of your money is particularly important at this stage. After all, retirement should be a time to relax and enjoy your free time rather than worry about your finances.
Here’s our rundown of eight must-have financial habits that can help provide peace of mind in retirement.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
1. Pay down your debts
Paying off your debts is crucial to achieving financial stability in retirement, so if you’re able to tackle as many of these as possible before you stop working. It will help you avoid being hit with high-interest charges and ensure that you have more disposable income.
Make a list of your debts, including mortgages, loans, credit cards, unpaid bills and overdrafts. Note how much you owe against each, how much you are currently repaying each month, any interest rates that are being applied to your debts and the dates on which payments need to be made.
Focus on paying off your high-interest debts first, such as credit card debt, followed by other debts. Read our article Six steps to take control of your debts for further guidance.
Bear in mind that many people don’t manage to pay off their mortgage by the time they retire. A rising number of retired borrowers is prompting lenders to push back the maximum age that you can be at the end of a mortgage term.
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Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with a mortgage adviser at HUB Financial Solutions. Speak with a qualified, FCA-regulated adviser you can trust. HUB Financial Solutions is rated ‘Excellent’ on Trustpilot. Please note your home may be repossessed if you don’t keep up with mortgage repayments.
Read more in our article What happens to my mortgage when I retire? and Mortgages for over 50s: what you need to know.
2. Work out your retirement budget
Budgeting may not be the most exciting part of your retirement, but it’s really important, particularly if money is tight. If you’re not already in the habit of budgeting, it can help you better manage your retirement income and make your money stretch further.
The first thing you’ll need to do when creating your budget is to work out how much retirement income you have coming in each month. This may come from a few different sources, such as your workplace pension, a personal pension, and State Pension if you’ve reached State Pension age. You might also have some investment or buy to let income, for example, that you use to supplement your pension income.
Once you’ve worked out your total monthly income, you can look at how much you’re spending each month. Find out more in our articles How to make a budget and stick to it and Five budgeting methods you might not have heard of.
After you’ve created a budget, making sure your outgoings don’t exceed your income, give yourself a trial month to see how it goes and if you’ve allocated things correctly. Towards the end of that month, sit down and see how you’ve got on. If you’re lucky, you might find that everything is working well, but budgeting is often an ongoing process, so you can work on fine-tuning using whatever budgeting style works for you until you feel you’ve got it right.
3. Check your entitlement to benefits
If you’re on a low income or if your circumstances change during retirement, it’s vital to check whether you might be eligible for any means-tested benefits to help you make ends meet.
For example, many people who are eligible to receive Pension Credit don’t claim it, so make sure you don’t miss out if you are.
Pension Credit has two parts, Guarantee Credit and Savings Credit. Guarantee Credit will top up whatever income you currently receive to £238 a week if you’re single, or £363.25 if you have a partner (in the current 2026/27 tax year).
Savings Credit is available to those who reached State Pension age on or after 6 April 2016 if you saved some money for retirement, for example, a personal or workplace pension. You can get up to £17.96 Savings Credit a week if you’re single, and up to £20.10 if you have a partner. You can find out more about how Pension Credit works and how to claim it in our article Pension Credit explained.
There are several charities and organisations which can advise you about any benefits you might be entitled to and can help you submit a claim. These include Turn2us, which can assess your eligibility for benefits through its Turn2us benefits calculator or by phone on 0808 802 2000. The site Entitledto.co.uk also has a free benefits calculator, which you can use to see what you qualify for.
4. Make sure you have an emergency fund
You could face a wide range of unexpected expenses in retirement, from home repairs to medical emergencies, so building and maintaining an emergency fund is crucial.
Experts generally recommend trying to set aside three to six months’ worth of income as an emergency fund, but you might want to put away a bit more if you can afford to. Your emergency fund acts as a safety net, providing you with financial security if you need some cash quickly.
Read more in our article How to build an emergency fund. If you’re struggling to maintain a savings pot, you may find some useful suggestions in our article How to save money – 21 best money saving tips.
5. Review your pension investments
It’s important to check where your pension is invested, and that you’re comfortable with this. Your investments should remain relatively well-diversified. This means ensuring that you haven’t become too skewed towards a certain market or particular type of holding.
As you approach and enter retirement, you’ll probably want to ensure that you’re focused on investments that aren’t too risky. This could mean increasing the amount you hold in bonds and cash, for example, and moving away from some investments in riskier areas such as emerging markets.
This may happen automatically if your retirement savings are invested in a lifestyling fund, with the process of moving into lower-risk investments usually happening five to 15 years before retirement.
Read our article Where is my pension invested? for more guidance on where you might be invested, and how to check.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
6. Plan for long-term care costs
The cost of long-term care can be prohibitive, and should therefore play an important part in your ongoing retirement planning.
You might not need support now, but it’s sensible to develop a plan for potential long-term care needs, including the possibility of needing to pay for care at home, or in a residential or nursing home. Broadly speaking, under current rules, to be eligible for help towards paying for care, you’ll need to have less than £23,250 in savings, including any income, benefits or pension.
This means the majority of people pay for their own care. The cost of long-term residential care can be eye-watering, often amounting to more than £1,500 a week, and sometimes even double this. However, there are more options that you might be aware of to cover the cost. These include pension income, equity release and deferred payment arrangements. Read more in our guide How to pay for long-term care.
7. Consider inheritance tax (IHT)
Under current tax rules, inheritance tax is payable at a rate of 40% on the value of your estate which exceeds £325,000. There is no inheritance tax to pay if your estate is worth less than this £325,000 threshold, which is also known as the nil-rate band, and there’s also no tax payable on monetary transfers between spouses or civil partners. The inheritance tax threshold will remain frozen at its current level until at least April 2031.
During retirement, you may want to consider looking at ways to reduce this tax burden for loved ones left behind. There are several ways to legitimately reduce any potential inheritance tax liability, but estate planning can be complex, so you should seek professional financial advice if you’re looking for specific recommendations based on your individual circumstances.
One simple way to reduce IHT, however, is to make use of annual gifting allowances. For example, you can give away £3,000 worth of gifts each tax year without them being added to the value of your estate. If you don’t use this annual exemption in a single tax year, you can carry it forward to the next. Find out more in our article Six ways to reduce inheritance tax.
As part of this process, make sure that you have an up to date will in place to ensure you don’t leave your loved ones with a bigger inheritance tax bill than you need to. Having a will means your assets will be distributed to who you want them to go to, and in a way that may help reduce any potential inheritance tax liability. Read more in our article How to write a will.
Bear in mind that, at the moment, you can usually pass pensions to your loved ones free of inheritance tax when you die. However, under proposals announced in the October 2024 Budget, from April 2027 pensions will for the first time fall into the inheritance tax net.
This includes both defined contribution benefits being paid as income to a dependant through an annuity or via drawdown and defined benefit pension lump sum death benefits.
Find out more in our articles Inheritance tax and pensions: what’s changing and 5 ways to beat pension Inheritance Tax Budget changes.
8. Seek help when needed
Maintaining financial habits in retirement is important, but decisions can be complex. Fortunately, there are places to find guidance and professional help.
The Government’s Pension Wise service, run by the Pensions Advisory Service and Citizens Advice, provides people aged 50 and above with free guidance on their pension choices at retirement.
However, if you want tailored advice and recommendations on your pension, you might want to speak to an independent financial advisor. They can recommend the best option for you based on your individual circumstances.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
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