Retirement can feel exciting, strange and slightly daunting all at once. After years of saving, earning and planning around work, you suddenly need your money to do a different job: support the life you want.
That is why the years before retirement matter. Good retirement planning is not just about asking, “Have I saved enough?” It is also about deciding how you want to take income, how much risk you are comfortable with, how tax fits in, and whether you want to stop work all at once or gradually.
At Aetas, these are the conversations we have with clients every week. Here are five decisions we think are worth making before you retire.
1. Know what retirement might cost
Before you decide how to use your pensions and savings, start by knowing what you are aiming for. Some costs may fall when you stop working. Others may rise, especially if you plan to travel more, support family, take up new hobbies or make home improvements.
The Retirement Living Standards can be a useful starting point. In 2025, they estimated that a single person may need around £13,400 a year for a minimum lifestyle, £31,700 for a moderate lifestyle and £43,900 for a comfortable lifestyle. For a couple, the figures were around £21,600, £43,900 and £60,600.
These are not personal targets. Your own number may be higher or lower. But they are a helpful way to start a practical conversation about what “enough” looks like for you.
2. Know where your income will come from
Most people do not rely on one source of income in retirement. You may have a State Pension, workplace pensions, personal pensions, ISAs, savings, investments, rental income or part-time earnings. The key is knowing how these pieces fit together.
A good first step is to check your State Pension forecast. The government service shows how much State Pension you could get, when you could receive it and whether you may be able to improve it. It is also worth checking old workplace pensions and making sure providers have your up-to-date contact details.
Once you know what income you may already have, you can see whether there is a gap between that income and the lifestyle you want.
3. Decide how you will take pension income
If you have a defined contribution pension, you usually have choices about how and when to take your money. You might take some tax-free cash, use drawdown, buy an annuity, take lump sums, or combine more than one option.
Each choice has trade-offs. Drawdown can give flexibility, but your money stays invested and can rise or fall in value. An annuity can provide a guaranteed income for life, but the decision usually cannot be reversed once it is set up. Taking large lump sums may feel useful, but it can create an unexpected tax bill and reduce the money available later.
You do not have to choose one route for everything. For some people, a blended approach works well: using secure income for essential spending and keeping some flexibility for extras, emergencies or family support.
4. Review how much risk you want to take
Retirement does not always mean moving everything into cash or very low-risk investments. Many people will need their money to last for 20, 30 or even 40 years. That means some investments may still need the opportunity to grow.
At the same time, the risk of market falls can feel very different when you are taking money out rather than paying money in. A fall in value early in retirement can have a bigger impact if you also need to withdraw income.
That is why it helps to review your investment risk before you retire. You may want a plan that keeps enough accessible cash for short-term spending, while giving longer-term money room to work harder.
5. Make tax part of the plan
Tax can make a big difference to retirement income. Pension withdrawals, State Pension and some investment income may be taxable. ISAs can be useful because income and gains within an ISA are tax-free, and the current adult ISA allowance is £20,000 for the 2026/27 tax year.
It is also worth thinking about the order in which you use different pots. Taking too much from a pension in one tax year could push you into a higher tax band. Using ISAs, cash savings and pensions in a joined-up way can help make retirement income more efficient.
Debt matters too. If you expect to retire with a mortgage, loan or credit card balance, your income target may need to be higher. Clearing debt before retirement can feel reassuring, but it is not always the right answer if it leaves you short of accessible savings. The best choice depends on your wider plan.
Will you retire all at once, or gradually?
One final decision sits across all five areas: will retirement be immediate or phased?
A phased retirement can give you more time to adjust emotionally and financially. It may reduce how much you need to take from your pensions at first, help you keep saving for longer, or allow you to delay taking some benefits. An immediate retirement may be right if you feel ready, have enough income, or want a clean break from work.
There is no single right answer. The important thing is to test the options before you make the decision.
How we can help
At Aetas, we help you bring the moving parts together. We can look at your pensions, savings, investments, tax position and retirement goals, then use cashflow planning to show how different choices could affect your future income.
Retirement planning is not about finding a perfect date or a perfect number. It is about making confident decisions, one step at a time.
If retirement is getting closer, a conversation now can help you understand your options and feel more in control of what comes next.
Frequently asked questions
How much income will I need in retirement?
It depends on your lifestyle, housing costs, health, family commitments and future plans. The Retirement Living Standards can be a useful starting point, but your own retirement income target should be personal to you.
Should I use pension drawdown or buy an annuity?
Drawdown offers flexibility, but your pension stays invested and can fall in value. An annuity can provide guaranteed income for life, but usually gives less flexibility once set up. Some people use a mix of both.
Why should I check my State Pension forecast?
Your forecast shows how much State Pension you could get, when you could receive it and whether you may be able to increase it. It is a useful foundation for retirement planning.
What is phased retirement?
Phased retirement means gradually reducing work instead of stopping all at once. It can give you more time to adjust to life after work and may reduce how much you need to take from your pensions in the early years.
Should I clear debt before retiring?
Clearing debt before retirement can reduce pressure on your income, but it is important not to leave yourself short of accessible savings. The right answer depends on your wider financial plan.