Retirement planning is useful at any age but as costs rise, having a financial strategy in place can be all the more important as you get closer to your golden years.
Ten years is typically the recommended time to start laying the groundwork for retirement and considering how you will access your hard-earned pension savings.
It comes as the latest data from Pensions UK shows a “comfortable retirement” for a single person now costs £45,400 per year, up £1,500 from 2025.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
A retiree would need a gross annual income of £54,720 to achieve this, according to Pensions UK.
Latest Videos FromMoneyWeek
Assuming you buy an annuity to fund this income entirely, this would require a pension pot of between £560,000 to £845,000, depending on the type you take.
That figure may rise if you are 10 years off retiring but it is worth considering how much you need to save into a pension to get to this pot size in the first place.
Other commentators suggest a pension pot of around £700,000 is needed to achieve a comfortable retirement through an annuity.
According to Fidelity’s projections, someone starting at age 25 would need to put £459 each month into their pension to reach that goal by 65, based on annual returns of 5%.
A 35-year-old would need to save £841 monthly, while a 45-year-old would need £1,703 a month – almost four times the commitment required at 25.
Start at age 55 and you would need to contribute £4,508 per month.
Ed Monk, associate director at Fidelity International, said: “Our research figures show that many people are taking positive steps towards improving their retirement prospects – whether that’s increasing contributions or planning to retire early. But intention alone isn’t enough.
“With the cost of retirement rising and expectations shifting, it’s vital that savers understand what kind of lifestyle their savings can realistically support.”
1. Check your state pension forecast
The full state pension – currently at £12,548 per year – will help cover some of your expenses but the amount may depend on the future of the triple lock.
You can check your state pension forecast at Gov.uk and see if there are any gaps in your National Insurance record that you could fill by purchasing extra credits to boost your payments.
However, the state pension age is on the rise and is set to increase from 66 to 67 in 2026 so you may have to wait longer for the money depending on when you retire.
2. Get to grips with your pension pots
The 10-year point is a good time to consolidate your pension pot and boost your pension contributions to maximise those final years of saving.
Monk said: “The decade before retirement often coincides with peak earning years. Use this time to maximise pension contributions and make full use of ISA allowances.
“Consolidating older pensions may also help reduce fees.”
Ross Lacey, director at Fairview Financial Planning says a good starting point is to track current expenditure, factoring in what will be different by the time you retire.
He said: “This will show an expenditure figure in today's money; but, this needs to be converted to what this will cost in the future, and then how that cost will keep on rising throughout retirement.
“The next steps are working out what you'll need your pensions, investments and cash to look like, and to do for you, in order to make that plan viable.
“Naturally, a professional financial planner does this with clients day-in-day-out.”
3. Reassess your investment strategy
Monk warns against de-risking too early but at some point you will need to consider moving out of risky equity products to get some security such as through bonds.
He suggests that five years is a good time to consider how you will access your funds such as through an annuity, drawdown or both, and whether you will still be able to afford your desired lifestyle.
Philly Ponniah, chartered wealth manager at Philly Financial, added: “This isn’t about moving everything into cash, but shifting the balance. You may want to reduce risk slightly while keeping enough growth assets to stay ahead of inflation.”
Once you are two years away from retirement, Monk suggests deciding how and when to draw different pots, and secure essential expenses with guaranteed income.
He said: “Check that your expected costs align with your lifestyle goals. Don’t forget to factor in inflation and any remaining debts.”
Many retirees follow the 4% withdrawal rule to ensure their pension pot doesn't run out of cash.
At this point in your life, when you plan to retire in two years, Monk suggests updating your documents, such as reviewing your will, setting up powers of attorney and planning for long-term care.
4. Beyond pensions
A pension may be just one asset you use to fund your retirement and other routes include running a buy-to-let portfolio.
Kundan Bhaduri, from property developer The Kushman Group, suggests the 10-year point is a good time to stress test your property portfolio.
He said: “Will your rentals still deliver net income if rates stay high or tenants become scarce? Prioritise reducing debt on the properties you plan to hold.”
Inheritance planning is also important.
Bhaduri added: “Maximise annual gifting allowances, consider setting up trusts, and factor in care costs.”
Landlords do need to consider extra regulations and responsibilities that have been introduced this year under the Renters’ Rights Act as well as the extra costs associated with buying and managing a property portfolio.
Inheritance planning
Inheritance planning is also important.
This is becoming more vital as unused pension wealth will be included as part of an estate for inheritance tax (IHT) purposes from April 2027.
Experts suggest maximising annual gifting allowances and considering setting up trusts, while factoring in care costs.
Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, said: “At present holding money in a pension and spending other assets means you have a pot of money which is available to pay for things like care fees should you need to, but on death those funds are not liable to IHT, making them the more-or-less perfect solution to the ‘access versus tax conundrum’.
“But from April next year such unused pension pots will be subject to IHT, and where the holder dies at 75 or older could become the costliest way to leave wealth due to the possibility of double taxation, where the beneficiary also pays income tax on withdrawals.”
There are some perils to be aware of if you use gifting to start sharing your wealth.
He added: “Generally, if you give money or an object away, you cannot continue to benefit from it. If you do, it is treated as a ‘reservation of benefit’ and it will still be included in the value of your estate when calculating inheritance tax. For example, you can’t give your house to your children but continue to live in it rent free, or even at a beneficial rent. The house in that case would still be liable to tax.
“However, there are some legal structures and steps you can take to gift while still retaining some access or control.”
