Retirement spending, budgets and tax

Get an idea about what you’ll spend, the importance of budgeting and tax in retirement.


Get ready for the next stage

Whether you’re considering early retirement, starting to think about your retirement or are recently retired, it can be difficult to know what to plan for or consider, given that you’ve never retired before.

Find out more about early retirement

How much you’ll spend in retirement

The Retirement Living Standards* suggest a single person needs £12,800 a year, or about £1,067 a month, to cover living costs in retirement, with some money left over for fun. For a couple, this rises to £19,900 a year or about £1,658 a month.

magnifying glass
Retirement stage

You commonly spend more in earlier years and less in later years.

Relationship status

You’re likely to spend less if you’re in a couple, as you’ll share some expenses.

pound sign

How much income is available to you is likely to influence how much you’ll spend.

Working out your retirement budget

Some element of budgeting is vital for retirement. Unless you know what you’re likely to spend, it’s difficult to know what income you’re going to need or if your hard-earned retirement savings will last.

The ‘70% rule’ suggests you’ll need 70% of your in-work income to keep the same lifestyle in retirement.

However, everyone’s outgoings and plans for retirement are different. So it’s worth taking the time and effort to work out what you want to do and get out of your retirement. This should help you get a better idea of what income you’ll need.

Tax in retirement

Your retirement income is taxed the same way as income when you’re working. Any income above your annual personal allowance is taxable.

If you’re planning to work in retirement, tax could also affect how much you decide to earn.

Careful planning can help you avoid paying more tax than you need to in retirement. For example:

  • Income you take from an ISA is tax free
  • If you’re a couple, maximising both your personal allowances could mean a retirement income of at least £25,500 a year tax free  
  • When and how you take your pension tax-free cash can affect your overall retirement income, as well as how much tax you pay over several years

When looking at your retirement income and tax, it’s important to look at all your possible sources of money together. 

Hints and tips from other retirees

A key part of being ready is having a financial plan that gives you confidence to step into the next phase of your life. This is something we could help you with.

We asked retirees what tips they’d pass on to others planning their retirement.


Prepare both financially AND emotionally for the move to retirement.

Clear plans

Have clear plans for what you’ll do with your time.

Open minded

Be open minded – life and circumstances change.

*The Retirement Living Standards have been developed to give people a better idea of the type of lifestyle they might have in retirement. For more information visit