As retirement approaches, your focus is likely to switch from building wealth to ensuring a steady, reliable income that supports the lifestyle you want when you’re no longer bringing home a salary. For many people over 40, you may ponder several questions, like:
- Will my pension be enough?
- How can I make my money go further?
- What strategies can I use to boost my income without taking unnecessary risks?
Thankfully, there are plenty of ways to strengthen your retirement income. In this article, we’ll cover how:
- You can maximise your State Pension and use your assets wisely.
- You can avoid common mistakes people make during their retirement.
- You can boost your retirement income through growing leveraging assets, using investment tools and more.
- You can prepare for your upcoming retirement with retirement planning services.
6 Ways to Make Your Money Go Further During Retirement
With retirement looming, you may look at your finances and worry that you don’t have enough to continue doing what you love. But, there are many ways you can make your money go further and boost your income during retirement. Here are six top ways to top up your retirement income.
1. Maximise State Pension Income
For many retirees, State Pension is their main source of retirement income. Making the most of it should be your first step.
One option is to top up your National Insurance record. If you have gaps in your contributions, perhaps due to time spent caring for children, unemployment or working abroad, you may be entitled to credits or the option to fill the gaps with voluntary contributions. These top-ups could significantly increase your weekly State Pension over the long term.
Another strategy is to defer claiming your State Pension if possible. For every year you delay (with a minimum of nine weeks), your eventual payments rise by roughly 5.8% annually. While this means waiting longer for it, it can provide a higher guaranteed base for later years, particularly if you expect to live longer than average.
2. Grow Your Pension Pot While Working
Your workplace or personal pension is a major way to boost retirement income. Even if you’re in your 40s or 50s, it’s never too late to increase your pot.
One of the simplest moves is to increase your contributions. Even a small monthly increase benefits from tax relief and, if available, employer matching. Thanks to compounding, those extra contributions could grow substantially by the time you retire.
You should also track down any old or lost pensions. Over the course of your career, it’s easy to forget about smaller pots from past employers. Consolidating them into one plan can reduce fees, simplify management and give you more control.
If your pension is underperforming or charging high fees, consider switching providers or funds. Moving away from default options into lower-cost, better-performing alternatives could improve growth without increasing your risk.
3. Use Investing Tools and Withdrawals Strategically
Once you retire, the focus usually shifts from growing wealth to drawing income. The way you manage your investments and withdrawals makes a big difference to how long your money lasts.
Income-generating investments, such as bond funds, dividend-focused equities or balanced multi-asset funds, can provide a steady stream of returns while keeping your capital invested.
Another option is flexi-access drawdown. This allows you to take up to 25% of your pension as a tax-free lump sum, while keeping the rest invested and withdrawing income as needed. This flexibility can be valuable, but requires discipline to avoid drawing too much too soon.
Annuities, once considered outdated, are making a comeback. With rising annuity rates and new estate-planning benefits, they offer predictable, guaranteed income for life. For many, combining a drawdown with an annuity provides a strong balance between flexibility and security.
You might also explore savings laddering, where you place money into fixed-term savings accounts that mature at staggered intervals. This strategy creates a rolling income stream while keeping your money accessible. When interest rates are favourable, retirees can generate thousands annually.
4. Leverage Assets Beyond Pensions
Your pension isn’t the only source of retirement income. Many homeowners unlock wealth from their property through equity release products such as lifetime mortgages or home reversion plans. These allow you to access tax-free cash without selling or moving, though they reduce the value of your estate.
ISAs also play a role in boosting income. By holding dividend-paying equities or bonds within an ISA, you can create a tax-efficient income stream, often using a balanced 60:40 mix between equities and bonds to manage risk.
5. Supplement Income via Work or Side Hustles
Working in retirement doesn’t have to mean a full-time commitment. Many people choose part-time roles, freelance projects or consulting to add to their income but with far more control than when they worked full time. Once you reach State Pension age, you no longer pay National Insurance on your earnings, making this option even more attractive.
Others create smaller income streams by renting out a spare room, selling items online or using cashback and survey platforms. While these aren’t likely to replace pensions or investments, they can provide some extra cash to cover regular expenses or luxuries.
6. Avoid Retirement Income Pitfalls
The biggest danger in retirement planning is running out of money too soon. Over-withdrawing from your pension puts your savings at risk of depletion. Instead, aim for a balanced ‘natural yield’ strategy where you draw income only from returns, keeping your capital intact as much as possible.
A bucket strategy can also help. This involves splitting your savings into short-, medium-, and long-term ‘buckets.’ The short-term bucket holds cash for immediate needs, the medium-term bucket uses safer investments like bonds and the long-term bucket remains invested for growth. This approach helps balance risk and ensures you always have funds available when needed.
Prepare For Your Retirement Sooner Rather Than Later
Boosting your retirement income is about building a strategy that blends multiple approaches. Maximising your State Pension, growing your pension pot, using investments wisely, leveraging assets and supplementing with work or side income can all come together to create a comfortable, reliable retirement.
At MHG Wealth, we specialise in helping you design a retirement strategy personalised to your goals and circumstances. Whether you want to explore annuities, consolidate pensions or use alternative investments for added security, our experts are here to guide you.
Key takeaways:
- Diversifying income through additional work, strategic withdrawals and leveraging multiple income-generating sources supports a robust retirement plan.
- Avoid over-withdrawing from pensions to preserve savings; consider balanced approaches like the bucket strategy for financial longevity.
- Customising a retirement strategy, such as utilising annuities or equity release, can enhance income stability and align with personal goals for a secure retirement.
Ready to boost your retirement income? Get in touch with MHG Wealth today to create a plan that works for you.
FAQs
Can you increase my State Pension in retirement?
Yes. By topping up National Insurance contributions and delaying when you claim your State Pension, you may be able to increase your entitlement.
Are annuities still relevant?
Absolutely. Rising annuity rates and upcoming inheritance tax changes make annuities an appealing way to secure a guaranteed income.
What’s a savings ladder and why use it?
It’s a strategy where you spread savings across fixed-term accounts that mature at different times. This creates a rolling stream of income while keeping money accessible.
Should you consider equity release?
If you’re 55+ and a homeowner, equity release can unlock tax-free cash from your property without moving. However, it reduces the value of your estate, so seek advice before committing.
How can I avoid running out of funds?
Use a mix of guaranteed income (like pensions and annuities), structured withdrawal strategies and avoid withdrawing more than 8% annually from your pension.
