Retirement can feel a long way off when you're busy juggling work, family and everyday life. But taking a little time now to create a retirement plan could make a difference to your future.
A retirement plan isn't just about numbers. It's about understanding the lifestyle you'd like to enjoy, working out how you'll pay for it and giving yourself the confidence that you're moving in the right direction.
You might find that the earlier you start planning, the more opportunities you might have in the future. And retirement planning doesn't just benefit your future self – it can help you feel more in control of your finances today. Whether you're years away from retiring, or already starting to think about life after work, these seven steps can help you build a retirement plan that's personal, practical and achievable.
1. Start by imagining your ideal retirement
Before looking at budgets, pensions or savings, think about what retirement means to you.
Ask yourself:
- Where would you like to live?
- How would you spend your time?
- Would you like to travel more?
- Are there hobbies, passions or causes you’d like to focus on?
- Do you want to support family members or make charitable donations?
Financial wellbeing is about more than money. It's also about having the freedom to do the things that bring you happiness, purpose and peace of mind.
Try writing a simple statement that makes your vision come to life, for example:
'When I retire, I'd like to live near the coast and spend more time travelling with my family.'
Once you have a clear picture of your future, you can break it down into smaller, realistic goals that will help bring it to life.
2. Work out how much retirement income you'll need
One of the most important parts of retirement planning is understanding how much income you'll need to support the lifestyle you want. Think about:
- Everyday household bills
- Food and transport costs
- Holidays and leisure activities
- Unexpected expenses
- Future care costs
- Money for family, gifts or charity
Remember that inflation can affect the cost of living over time, so what feels affordable today might cost more in the future.
Having a target income in mind gives your retirement plan a clear direction and makes it easier to assess whether you're on the right track.
3. Understand where your retirement income will come from
Next, make a list of all the income sources you expect to have in retirement. These might include:
- Workplace pensions
- Personal pensions
- The State Pension
- Savings accounts
- Investments
- Property or other assets
For many people, pensions will provide the largest part of their retirement income.
If you're unsure what pensions you have or how much they could provide, pension calculators and planning tools can help you build a clearer picture. Knowing what's already in place can make retirement planning feel more manageable.
Once you've mapped out your expected income sources, you'll have a stronger foundation for the rest of your plan.
4. Create a retirement timeline
A retirement timeline can help turn your goals into a practical plan.
Start by deciding when you'd ideally like to retire. Then think about the years that follow. You might want to include:
- Major holidays or travel plans
- Home improvements
- Helping children or grandchildren
- Downsizing your home
- New hobbies or interests
- Significant birthdays or milestones
Adding these events to a timeline makes it easier to estimate future spending and understand how your income might be used over time.
It can also help you spot potential gaps and prepare for them.
5. Set clear savings goals and milestones
A succesful retirement plan isn't just about the future – it's also about the actions you take today.
Create a timeline from now until your target retirement date and set realistic milestones along the way.
For example:
- Increase pension contributions this year
- Reach a savings target within five years
- Pay off outstanding debt before retirement
- Review pension performance annually
Breaking larger goals into smaller steps can make progress easier to keep an eye on and help keep you motivated. Regular milestones also give you opportunities to celebrate your wins and adjust your plans if needed.
6. Prepare for life's unexpected moments
While it's great to focus on the retirement you hope for, it's just as important to plan for those situations you might not expect.
These could be:
- Ill health or care needs
- Changes in family circumstances
- Rising living costs
- Debt repayments
- Market fluctuations
Building a bit of flexibility into your plan can help you feel more prepared and confident when life takes an unexpected turn. A retirement plan doesn't have to be perfect, instead, it should give you options and help you make informed decisions as circumstances change.
7. Review and update your retirement plan regularly
Your retirement plan should grow and change with you.
As your finances, priorities and situation evolve, your plan should too. That's why it's a good idea to give it a look over at least once a year. Ask yourself:
- Are my retirement goals still the same?
- Has my income changed?
- Am I saving enough?
- Have my retirement plans become more ambitious?
- Are there new risks I should plan for?
Regular reviews can help make sure your plan stays relevant, realistic and aligned to what matters most to you.
Top tips to make your retirement plan work harder
Once you've created your plan, these simple ideas can help you stay engaged with it over the long term:
Keep both digital and physical copies
Having easy access to your plan can make it simpler to review and update when needed.
Talk about your plans
Discussing retirement with your partner, friends or family can provide useful perspectives and support. You may also discover ideas you hadn't considered.
Make it personal
Use colours, images, notes or visual timelines – whatever helps bring your goals to life and keeps your future plans front of mind.
Why planning can bring a bit of safety and happiness
Retirement plans don’t have to govern your life, but they’re can be a helpful way of envisioning your future, and could help you overcome any financial hurdles or worries which get in the way of making it a reality.
If after reading these tips you’d like some more support, we’d recommend accessing professional financial advice. An adviser can act as your financial coach, providing tailored advice based on your own personal situation and needs. There’s likely to be a charge for this service, if you don’t already have a financial adviser, you can find one by visiting MoneyHelper.