Making Cents: getting the most from your finances in retirement

Planning for the future can be a source of uncertainty

Financial advisers spend a lot of time talking about planning for retirement, with starting and maintaining a pension seen as a key priority for all. 

But while building up funds for when you finish work is indeed crucial, it is also important to spend some time thinking about how you manage your money once you have retired. This is a new phase of life and retirees need to figure out how their spending will change. 

So if you are newly retired, or set to become so in 2022, take some time to establish habits that will keep you in good financial shape.

Take time to establish your total income, from state and private pensions and any other sources and from there work out your weekly and monthly budget. Make sure you are claiming all the state supports you are entitled to, such as the Household Benefits Package (see below). 

If you are unsure, Citizens Information can provide you with detailed information on income supports and a range of other benefits to which you may be entitled.

The Retirement Planning Council of Ireland (RPC) highlights that the average worker gets back 50 hours per week in retirement and warns that is easier to spend money when you are not working.

If you are newly retired, former Pensions Ombudsman and Course Leader for the RPC Paul Kenny suggests watching your spending closely in the early months.

“New retirees should budget for miscellaneous spending each month, including coffees, lunches, books and clothes," he says. 

"It is also a good idea to use cash during the first weeks of retirement – as it feels like real spending – instead of tapping a bank card, where the charge might not be taken from your account for 2-3 working days. This is recommended to measure and control spending.

"However, this advice might not be so easy to follow during the pandemic, as most traders prefer contactless payment, or at least payment by card instead of cash.” 

If you don't the idea of switching to cash in the current circumstances, another option is to keep a spending diary. This can be a simple document in a notes app on your phone or a small notebook. Simply take a minute to record the purchase every time you spend money. 

Even doing it for a week or two will give you interesting, and sometimes surprising, information on your spending.

When working within a fixed budget, unexpected outgoings can have a major impact. Take some time to list items that will come up during the year, so they don't come out of the blue and create stress.

With rising inflation, it is even more important to keep a close eye on your outgoings.

“It is useful to know what’s coming in, and when, what the likely expenditure is, and when it is likely to arise," Mr Kenny says."That way, you can anticipate large outgoings (such as a tank of heating oil) and put some money aside regularly for those.” He also advises retirees to look at spreading out payments over a period rather than being met with lump sum payments.

“Many companies, such as motor and home insurers, will allow payments to be spread over most of the year, in some cases without any extra charge" he says. 

"TV licence fees can also be paid by monthly instalments if you haven’t yet qualified for the Household Benefits package (HBP).” The HBP helps with the cost of your electricity or gas bill and the TV licence.

You can get the package if you are aged 70 or over. You do not need to be getting a State pension and the package is not means tested. People under 70 can also get the HBP, but additional rules apply, find out more and apply at mywelfare.ie.

The RPC also highlighted the importance of shopping around with different service providers to get the best deals, and says new retirees should also remember to take advantage of discounts.

“Older people should also be aware of discounts that are available in retirement," Mr Kenny says. 

"Many retailers offer discounts to older people, usually on specified days of the week. Senior discounts are also available from some theatres and cinemas. Some gyms offer reduced membership prices for daytime hours, when other members are at work. Every trader values the “Grey Euro” - make the most of it!”