How to save during retirement
You may be eagerly looking forward to your retirement, welcoming the prospect of taking things easier and carrying out exciting plans. At the same time, however, you may have a nagging concern as to whether your savings will last long enough.
We explore some practical steps to boost your savings and make them last longer throughout your retirement.
Keep enough for emergencies
It’s recommended you should have one to three years of easily accessible emergency expenses if you’re retired, compared with three to six months’ when you were in work with a regular salary.
This gives you peace of mind if you suddenly get an unexpected bill. You’re unlikely to have to withdraw the whole amount at once, though, so while it’s a good idea to have some in an instant access account, have some in fixed term accounts, where it can earn more interest until you need it.
Examine your outgoings
You don’t want to have to scrimp and save in retirement, but there will be some areas where you don’t need to spend as much money as you once did. Take a critical look at your expenses, analyse your last few bank statements and see where your money is going.
You may be spending less on commuting now, for example, but more on heating as you’re at home more. Check your direct debits carefully. Can some be cancelled or reduced? Look at your gas and electricity contracts. It’s worth checking if you can get a cheaper deal anywhere, especially in today’s climate of soaring energy bills.
Save little and often
One to three years of expenses may sound like a huge amount, but if you get into the habit of putting a little bit aside on a regular basis, your savings will soon mount up. Decide to save a certain amount each day, week or month. Try out one of the banking apps available which round up the few pence in any debit card transaction to the nearest pound and move the remaining cash into a savings pot.
As you’ll have more time and flexibility, think about shopping smartly or walking instead of automatically jumping in the car as additional ways to save money.
Make sure you know what you’re entitled to. In 2021-22, the full level of the new state pension is £179.60 a week (£9,339 a year), although the amount you receive will depend on how many National Insurance contributions you’ve made throughout your working life. Those on a low income are entitled to Pension Credit, which currently tops up the state pension to £177.10 per week for a single person or £270.30 for a couple.
Take advantage of any help available for household bills. The Winter Fuel Payment is automatically paid to retirees who receive the state pension or other benefits. A free TV licence used to be offered to anyone over 75, but is now only available to those who are on Pension Credit and over 75.
You haven’t worked hard all your life to have a miserable retirement, so look out for any special offers for senior citizens that can help you make the most of your newfound freedom – for example, at National Trust properties, cinemas, theatres, leisure centres and restaurants.
Investigate what travel perks are available. People often joke about “getting their bus pass” as a symbol of being retired, but it’s a great way to get about cheaply. Although you have to wait until state pension age in most of England for a free travel pass, if you live in Scotland, Wales, Northern Ireland or London, you’re eligible from the age of 60.
Use your home as an asset
This won’t be for everyone, but you could make money from your home through the Rent-a-Room Scheme. Under this initiative, you can let out a spare room and get up to £7,000 income tax-free, provided you still live in the property. Alternatively, you could rent out a spare parking space. Some people even rent out their home or garden for photo shoots or filming purposes and benefit from the £1,000 tax-free property allowance for this sort of income.