Knowing how to spend your money in retirement is just as important as saving. Here’s why…

NASA astronauts Suni Williams and Butch Wilmore recently landed back on Earth after a nine-month sojourn at the International Space Station. However, their initial mission was only intended to last for eight days, with the extended “stay” enforced by technical problems with their spacecraft.

The pair were eventually able to hitch a ride back, albeit months later than expected.

The moral of this rather strange story is that, while it’s important to plan on the way up, securing a safe landing is equally as crucial.

In finance terms, this is similar to the accumulation phase of your pension planning, when you seek expert advice on the best way to save for your retirement.

But equally as important is considering the decumulation phase, where you work with your financial planner to establish the most effective ways to spend your hard-saved pension pot.

So, find out why the “take-off” for your retirement is just the start and how working with a financial planner can help ensure a safe, smooth descent back to Earth.

Taking advice about your retirement could help you achieve your goals

One of the biggest challenges in planning for retirement is knowing how much you need to save.

The Pension and Lifetime Savings Association (PLSA) sets out its Retirement Living Standards, showing figures and statistics relating to a range of different lifestyles in retirement.

These figures show that for a single person to have a “minimum” lifestyle, covering all essentials, they would need an annual income of £14,000. To boost this to a “moderate” lifestyle, with more financial security and flexibility, this would increase to £31,000 a year. A further lifestyle elevation to “comfortable” would need £43,000.

For couples, these figures change to £22,000, £43,000 and £59,000, respectively.

Of course, while these are interesting as notional ideas, it’s worth emphasising that there’s absolutely no one-size-fits-all answer for funding retirement. It’s always better to take an individual approach.

So, these can give something of a ballpark idea of the fluctuating amounts that retirees will need to consider, along with their lifestyle choices and living arrangements. But, a financial planner can help you to work out your figures to meet your own aspirations.

Life expectancy, inflation, and market fluctuations could affect your wealth during retirement

Although you can predict what your retirement might cost, you may be worried about your pension pot running out in retirement. And just like the NASA astronauts, you want to make sure the return journey when you access your pot is a smooth and successful one.

This is a prominent concern for retirees. In fact, IFA Magazine cites a study by finance behavioural experts Oxford Risk, showing that more than half of its 1,000 respondents worry their retirement savings won’t last their lifetime.

Furthermore, 12% fear they’d need to rely on financial support from their children in retirement.

There are a number of factors that can influence your wealth once you retire, leading to these concerns of running out of money. The three main ones are:

1. Life expectancy

According to the Office for National Statistics (ONS), life expectancy at birth was 79 years for males and 83 years for females in England and Wales between 2021 to 2023.

While you clearly can’t know your exact life expectancy, you can plan certain elements of your retirement based on your aspirations; for example, if you’d like to travel while you’re younger.

It’s also worth establishing how you’d finance potential care in your later years, as this can be costly and can become necessary at the point when it’s least affordable – after you’ve spent much of your savings.

2. Inflation

The longer your retirement, the more your pension pot is likely to be adversely affected by inflation, where the cost of goods and services increases, meaning your money does not stretch as far year-on-year.

The way you access your pension could be impacted by inflation. For example, if you purchase an annuity with no inflation guarantee, you’ll have a steady, regular income for a fixed period – usually the rest of your life.

However, if inflation rises – as it likely will over the course of your retirement – then this will mean your annuity income’s purchasing power will have fallen relative to the cost of goods and services.

Similarly, if you flexibly draw too much from your pot in your early years, inflation may make your standard of living unaffordable if you don’t have a plan to keep your wealth growing.

3. Fluctuating markets

As markets fluctuate over time, you’re likely to see your pension investments at the mercy of certain times of volatility as well as periods of stability.

This could mean that you need to sell more units to realise the same levels of income, depleting your funds more quickly.

It can be unsettling to feel that your pension investments are taking a hit, but history does tell us that the markets will eventually settle. Indeed, the best course of action is often a calm one.

Read more: Why the market volatility from the Trump tariffs is a reminder of the importance of staying invested 

Your financial planner will work with you to check that your investments are well-diversified across a range of industries and countries. Additionally, they can regularly assess your need for risk, and whether you could benefit from a lower-risk portfolio.

Base your financial plan around your goals to enjoy your retirement to the fullest

As you can see, there are challenges in saving for retirement, and potentially even more when spending. This is where a personalised financial plan developed with a financial planner can add real value.

Everyone’s ideal retirement looks different. So, the first thing to do is set out what your goals are. For example, do you want to travel, sell your property and downsize, or maybe help support your family financially?

Your financial planner can then help you draw up a financial plan for funding your retirement in line with these goals, designing a sustainable retirement income, no matter how long you live.

This will:

• Consider all your pensions, savings and investments
• Ensure your income is as tax-efficient as possible
• Organise the rest of your wealth to protect you against risks such as inflation and market volatility.

Get in touch

Building up your pension funds is a key part of financial planning, and establishing how to effectively employ them in retirement is equally important.

Talk to us today to find out how we can help you create a financial plan to sustainably achieve your goals in retirement.

Email contact@caliberfm.co.uk or call 01525 375286 to speak to one of our team today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.