If you’ve still got a few years to go until you retire, this could be the perfect time to think about how you’ll manage your money once you stop working. One of the biggest concerns that people have is outliving their savings, so drawing up a budget will help you calculate how much income you’re likely to have and what your outgoings are likely to be. That way, you’ll avoid one of the biggest retirement mistakes that people sometimes make, which is spending too much too soon.

Patterns of expenditure

It’s common for people to have higher expenditure in the first few years of retirement. Many people decide to travel or pursue leisure activities while they have the time, means and fitness to do so. Later in life spending patterns are likely to change, with more funds often needed to meet health and care costs.

A retirement budget will give you a clear picture of what your future income and capital needs are likely to be. It can help you take the right decisions about timing your retirement, such as calculating your likely income, depending on whether you choose to retire early or late.

Your budget is not a once-and-for-all exercise, it’s a living document that should be regularly revisited to ensure that it reflects your changing situation. It can help you take a range of lifestyle planning decisions, for instance whether it would be financially beneficial to downsize at retirement, or help you assess when and how much money you can afford to pass on to your family.

Tax treatment depends on individual circumstances. Tax treatment, rates and allowance are subject to change.

The value of pensions and investments can fall as well as rise. You may get back less than you invested.

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