Think about where you want to live

Deciding where you want to live out your retirement can be tricky. You might have dreams of selling up and retiring abroad, plans to move closer to family, or you might want to downsize.

If you're considering moving house, potentially with the hope of freeing up some extra cash, it might be harder than you think. You might find that the emotional ties you have on your house are hard to break. People also underestimate the financial costs. Stamp duty, redecorating and removals can all add up, so it might be more expensive than you first thought.

These considerations are most important if you're relying on downsizing to boost your retirement income. It's worth having a back-up plan, just in case things don't go as you expected.

Think about when you might want or need to finish work

With the disappearance of the 'job-for-life', the line between retirement and working life isn't as clear cut as it used to be. But knowing roughly when you want to stop work is a good start.

Nowadays more people are choosing to reduce their working hours and opt for semi-retirement first, rather than give up work completely. It allows a more appropriate balance between life and work, maintaining a level of guaranteed income, whilst having more time for yourself.

All employees have the right to request flexible working from their employer, which includes cutting down your hours. Your employer has the right to refuse but they must give you a valid reason for doing so.

The Citizens Advice Bureau provides guidance on how to request flexible working.

More on semi-retirement

Work out how much you need to retire

Most people strive to live comfortably in retirement. But knowing how much money you'll need to live on in the future, can be hard to pin down.

To help simplify saving for retirement, the Pensions and Lifetime Savings Association (PLSA) has launched national income and living standards to help people work out how much income they might need.

They have set out three living standards:

• Minimum: £10,200 a year which will cover all your needs with a bit of money left over for fun
• Moderate: £20,200 a year, which would leave you more financially secure
• Comfortable: £33,000 a year which would mean you have more financial freedom and can afford some luxuries

These figures are based on a single person living outside of London.

Our pension calculator can help you to work out how much your current pensions might be on track to pay you. And if you're not on track, you'll find out about the things you can do to help get you there.

Try our calculator

Get to know your pension options early

You can make transitioning into retirement that little bit easier by getting to know your options early. For most of us the State Pension won't be enough on its own. And you might need to take money from your pension before you reach State Pension age. Typically you can access your personal pension from age 55 (rising to 57 in 2028). There are three main options to choose from:

• Annuities - An annuity will provide you with a secure income for life. You can usually take up to 25% tax free and then your annuity income is taxable.
• Drawdown - Keep your pension invested, taking the income you want, when you want. This is a flexible option, but also risky, because you could run out of money. You can usually take up to 25% tax-free cash at the start.
• Lump sums - Keep your pension invested and take money from it when you like. 25% of the withdrawal is usually tax-free and the rest is taxable. This options is also flexible but risky, because you could run out of money.

What you do with your pension is an important decision. We strongly recommend you understand your options and check which options are right for you. Take advice or seek guidance if you're unsure.

Think about how long your pension needs to last

These days we're living longer and healthier lives. So we need to make sure our pensions last longer too. It can be tempting to withdraw whatever amount you want, but without any real planning you could find yourself running short later on.

If you're choosing to keep your pension invested it's important to think about an income and investment strategy. You could choose to just take the income that your investments produce, you're less likely to run out of money. This strategy is also known as taking the natural income (or the natural yield), and improves the chances of a growing pension over time which continues to provide an income.

This strategy doesn't come without risks. The income that your investments produce could go up as well as down and therefore so will the amount available to withdraw. You can find more income and investment strategies in our guide to investing in drawdown.

Alternatively, choosing to exchange your pension for an annuity means you will receive a guaranteed regular income for as long as you live. But it's important to consider the right time to buy an annuity. For most people it might make sense to wait until after you've finished work completely. You'll no longer have an income stream from your earnings, and an annuity can help cover your essential bills without worry.