The Mid Life guide to adjusting your finances for life on a pension

It’s on the horizon, you can almost smell the beach at the Costa Del Sol, you’ve earned a five star retirement but have you saved enough of those earnings to see you through? 

If you’re like most people on the verge of retirement, you’ve probably got a money worry or two. Adjusting to life on a pension doesn’t have to be intimidating. 

Pension contributions

Hopefully, you have been taking advantage of the Inland Revenue Salary Sacrifice system or AVCs and plowing extra money into your retirement fund.  By sacrificing some money now, and placing it into your tax free pension account, you reduce your taxable income, so you can eventually spend your tax pounds on that trip of a lifetime.  There may also be other ways to minimize your tax through family trusts and clever investments, make sure you’re watching every penny!

Now is the time to review your investments too.  The recent financial crisis may have left a big hole in your portfolio.  If you haven’t already, it’s time to consult your financial advisor about reassessing your investments, to find the best balance between maximized income and long term security.   If you don’t have an ISA – start one now!

Where does the money go?

Next, take careful stock of where your money goes each month – it’s time to decide where you can tighten the proverbial belt.   List the things you have always dreamt of doing and set aside the money you will need for the important ones.  If you have this money now, put it in a high interest bearing account until you are ready to use it. 

Find out exactly how much you will have to retire on, set yourself a livable daily budget (you may like to try an online retirement calculator to help you plan your spending), and practice living to this budget now.  Once you remove your work expenses, will this budget be sufficient?  If not, speak to your financial advisor about what can be done now.

Shop around 

Contact your utilities and communications providers and your local Council One Stop Shop to ask for any discounts such as subsidized transport or electricity supply you may soon qualify for.  It may also be useful to discuss your finances with your local benefits office depending on your situation.

Next, shop around for insurance.  Nowadays there are plenty of insurance companies catering to retired people with heavily discounted motor and home insurance on offer.  Consider whether a second car is still necessary, and whether you still need that cell phone and high speed internet you’ve been using for work. 

The Grocery bill

You will find that one of your biggest expenses is the weekly grocery bill.  Investigate fresh food markets and countryside stalls that sell heavily discounted fresh food in the peak of its season.  There may also be a bulk fresh food market nearby that caters to retailers, often these are open to the public too and are a far cheaper option. Purchase meat and household items in bulk from warehouse stores.  If you have a business name registered (for any earnings from your hobbies) you may be able to buy from wholesalers, saving extra on tax.

Take note of the clearance days at your local market.  At least one day each week, larger stores will clear fresh foods, dairy and other perishables that are still in perfectly good condition but will soon reach their sell by date (sometimes stores called it their “market day”).  Either cook or freeze these items straight away.   Cook extra portions of foods such as pasta sauces and casseroles to freeze and then reheat as needed.  And of course, keep an eye out for offers at your local grocery store.

Now that you have more time, consider growing a vegetable garden or window box.  Try to plant the more expensive vegetables and herbs that you use regularly.

Subsidise

If your financial situation becomes unmanageable, there are options to make money in retirement.  If you own your own home or at least have a spare room, consider opening your doors to a foreign student.  Students pay up to £120 per week and in many situations, this money is tax free.  You may also wish to consider generating income from something you enjoy, such as teaching a musical instrument, hosting cosmetic and home wares parties, selling craftwork on Ebay or even qualifying as a Marriage Celebrant, ESL teacher or Interpreter.  

And finally, before you make a purchase, calculate just how much it is really going to cost. Beyond the price plus vat, a £500 purchase today may cost you a holiday next year.  Consider how many hours you had to work to save that £500, and consider if the purchase will make you happy for at least that long.  If not, don’t buy it, and if so, wait a week and see if you still want it so badly.

Consult your Financial Adviser on all the ways that you can manage your investments and budgets better and retire the way you’ve always wanted!

About the Author:

Susan Long has spent many years developing strategies for making the retirement dollar go further through her work at Sell House Fast

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