Ten tips for a pre-retirement financial spring clean

21 March 2024

Written by Retirement Line Updated: 21st March 2024

As the buds bloom and the days lengthen, spring isn’t just our cue to get the duster out – it’s also the ideal time to give our finances a spring clean too. This is especially the case if retirement is on the horizon. 

A thorough spring cleaning of your finances can pave the way for a more secure, relaxing and enjoyable retirement. To help you get started, here are ten tips to help you declutter, organise and optimise your financial situation.

1. Create a realistic budget

If you love a good spreadsheet then this first task will be right up your street. No overhaul of your finances can begin without an in-depth assessment of your monthly budget. Start by listing all the incomings you have each month, then work through your bank statement to identify all your outgoings. 

This could help you manage your finances better during retirement. You may even be able to identify where potential cuts can be made to help you save more for your retirement fund, if retirement is still a little way off.

Examples of savings you may be able to identify: 

• Clearing small debts to remove interest payments.

• Stopping unnecessary subscriptions - are you paying for things you don’t need or use?

• Planning your meals better to avoid food waste.

• Buying everyday grocery staples from budget supermarkets.

• Getting more from the perks of being older - if you are eligible for a free bus pass, have you applied and do you use it?

Creating a budget is a great way to identify bad spending habits - and replace them with money-saving alternatives!

2. Check your State Pension entitlement

Your monthly budget will change when you reach retirement so calculating your adjusted income helps you plan ahead. Start by checking your State Pension forecast. 

You can also use the government’s State Pension website to check your National Insurance contributions and make any necessary contributions to fill gaps. Understanding your State Pension benefits will give you a clearer picture of your overall retirement income.

3. Find and review your pension plans

Next, gather and review your pension plans. If you have paid into multiple pensions over your career then now is the ideal time to check you have an up-to-date statement for each. If not, contact your pension providers to ensure they have your correct contact details, as many pensions are lost by people moving house. 

If you can’t remember the name of a pension provider then you can use the government’s online Pension Tracing Service. At this point you might want to look into the potential benefits of consolidating your pension pots into one fund ahead of your retirement. 

4. Calculate your retirement income

If you have one or more ‘defined contribution’ pensions, your pension statements should give you projected fund values for when you reach retirement. You can use these fund values to estimate how much income you might expect from your fund.

For example, if you are considering using some or all of your pension savings to buy an annuity, you can use an annuity calculator to calculate your potential annuity income. You will find similar calculators online for drawdown pension income.

These calculations, along with the income you’ll achieve from the State Pension and any ‘defined benefit’ pensions you hold, will help you to budget for retirement.

5. Assess your investment portfolio

Do you have money invested in places other than pension schemes? If so, it is worth assessing your portfolio to ensure your current investments align with your risk tolerance and retirement timeline. 

If you don’t feel confident making investment choices, consider speaking to a financial adviser. They can help you to make suitable investment decisions as you approach retirement.

6. Explore healthcare options

If you have previously benefited from private healthcare as part of your job then you’ll need to decide if you want to pay for your cover to continue into your retirement. 

It’s not something many of us like to talk about, but illness and injuries do happen; usually more so as we get older. Knowing you are covered and protected with private healthcare can bring enormous peace of mind. 

Shopping around to find the best cover for you, at the best price, can make a real difference in your retirement, so do choose wisely. There are many different levels of cover and healthcare insurance companies to choose from, such as BUPA, Saga, AXA and more.

7. Declutter and raise some extra cash 

If you are combining a financial review with an actual spring clean of your home, you could make hundreds of pounds in the process. You could be amazed at how much cash you can raise by selling your clutter. Advertise online or on local notice boards, or have a yard sale to find new homes for the things you no longer need.

When you’ve decluttered, you may even find that you could live quite happily in a smaller home. This could open up the opportunity to downsize, releasing cash and potentially benefiting from lower council tax bills, energy bills and water rates throughout your retirement. 

8. Update your will and arrange an LPA

Your will ensures that your home, possessions and money goes to the people you choose. Without one, the laws of intestacy decide who everything goes to – and it might be very different to what you might have wanted. 

When arranging or updating your will, make sure you appoint your Lasting Power of Attorney (LPA), too. An LPA ensures your nearest and dearest can speak for you about your health care and/or finances if you should become incapable of doing so yourself. In the event of an accident or a diagnosis of dementia, for example, an LPA can be invaluable.

9. Build an emergency fund

If you don’t already save for a rainy day then now is the time to set yourself an achievable goal each month and start putting money away each payday. A robust emergency fund is crucial in retirement, providing a financial safety net in case of unexpected expenses.

10. Educate yourself on tax implications

Some people assume that retirement income is exempt from tax but sadly that is not the case. By educating yourself on the tax implications of your retirement income, you can adjust your retirement budget accordingly so there are no nasty surprises. 

Being aware of any tax you’ll have to pay on your pensions, investments and other income sources can also help you to plan ahead. If in doubt, speak to a financial adviser who can explain how you could take your retirement income in the most tax efficient way.

Enter your retirement with confidence

Spring cleaning your finances before retirement is a proactive step toward a more secure and enjoyable future. By taking the time to organise and optimise your financial situation, you can enter retirement with confidence, knowing that you've set the stage for a financially comfortable and fulfilling life after work. Consider these ten tips as a starting point for your financial spring cleaning journey!