Customers helped

How to plan for retirement at different life stages

Updated 21 December 2023

4min read

Craig Rickman
Senior Content Writer

Saving for retirement is often compared to marathon training. And it’s clear to see why.  

In either scenario, the earlier you start preparations, the better chance you’ll have of success.

And it’s not just the timeframe that matters. Those who are committed every step of the way will reap the greatest rewards down the line. 

A further similarity is the importance of having a plan – one that reflects how your circumstances change as time moves on.

For instance, some points may require you to up the intensity, especially if your preparations started slowly. 

As the retirement savings journey often spans several decades, it can be helpful to separate your plan into stages.

This will help you achieve the right blend of enjoying the present and funding your future.

Here we outline the key retirement planning considerations at various stages of your life. 

Stage one: early adulthood (age 20 to 35) 

After starting in the workplace and with your adult life ahead of you, paying into a pension might be the last thing on your mind. 

Naturally, more immediate financial goals such as travelling, clearing university debt, and saving for a house deposit may take priority.

And not to mention, as people typically earn less in their early working years, your scope for saving may be limited. 

That said, the best time to start a pension is when you’re young as you have more time for your money to grow – every year that you delay can prove costly.

Barnett Waddingham, a professional services consultancy, estimates that putting off saving until middle age could lose you up to £100,000 in a combination of employer pension contributions and tax relief.  

The good news is, as soon as you start work, you’ll automatically enrol in your employer’s pension scheme.

By law, if you pay 5% of your salary, your employer must pay 3%.

As the above figures highlight, making the most of this is crucial to amassing the pot you need to live comfortably in later life. It’s also at this point where you’ll most benefit from compound growth. 

In terms of how to invest your pension, given the lengthy timeframe, it’s important to choose assets that offer the best opportunity for growth, such as stocks and shares.

While the value can fall as well as rise, you should have plenty of time to ride out the ups and downs. 

Stage two: the middle years (age 35 to 50) 

Financial responsibilities tend to start racking up once you hit your mid-30s. You might be paying off a mortgage and forking out on childcare fees. 

On the flipside, as your career advances, your earnings should start to increase. This is where saving for your retirement can bring additional benefits. 

Anyone earning more than £50,270 a year can benefit from 40%  income tax relief.

This means that for every £100 you pay into a pension, the actual cost to you is £60. Coupled with employer contributions, this offers a great opportunity to supercharge your savings. 

Once you hit your mid-forties, it’s important to gain a yardstick of where your current savings are in relation to your goals.

You may have even fleshed out what these goals look like, such as the level of income you’ll need and the age you wish to pack up work. 

Stage three: road to retirement (age 50 to 65) 

As you turn 50, the focus on your retirement savings should be at its sharpest. This is the time to make some serious headway towards your goals. 

If you’re concerned that your savings pot is behind schedule, try not to panic.

You still have plenty of time to make a difference.

As you move through this phase, many of your financial commitments should ease; you might be close to paying off your mortgage, and your children should be less financially dependent.

Furthermore, many people’s earnings peak once they hit their 50s. 

The combination of rising income and falling outgoings is an opportunity to start ploughing as much as you can towards retirement – especially if you need to play catch up.

Any money in the bank that you’re happy to forgo access to can be shifted into your pension in the form of lump sums, giving your savings pot an extra boost.  

The maximum you can pay into a pension in any given year and receive upfront tax relief is 100% of your earnings or £60,000, whichever is lower - this is called your annual allowance.

You may even be able to pay in more using something called carry forward.  

As you head towards age 65, your retirement plans should be firming up, with a clear idea about the final action needed to hit your target income.

This will make the decision-making process easier once you hit phase four. 

Phase four: reaching and during retirement (age 65 and onwards) 

At this point, your objectives should shift from growing your wealth to using it for income.

Your main aim is to ensure your retirement pot can support you financially for the rest of your life. 

When deciding how to use your pensions for income, you have two main choices: buy an annuity and secure a guaranteed, lifelong income or take payments flexibly using income drawdown. 

This is a decision that needs to be taken with care as each option has several benefits and drawbacks.

With drawdown, while you have the carte blanche to draw money out as and when you please, the main risk is that you could run out of money down the line – especially if your investments don’t perform as well as you hope. 

Meanwhile, while an annuity can provide the comfort that you have a fixed, guaranteed income for the rest of your life, the decision to buy one is irreversible, and you completely lose access to the capital, leaving nothing for your offspring to inherit. 

However, this isn’t a binary choice. In many cases, a combination of guaranteed and flexible income is the most suitable approach, offering you the best of both worlds. 

Upon reaching age 66 - or 67 from 2028 - if you’ve paid sufficient qualifying national insurance contributions throughout your working life, you can also enjoy the new full state pension.

At £203.85 a week, this can really make a difference. 

How can advice help me? 

Wherever you are in the retirement savings journey, seeking professional advice can really help.

An expert financial adviser can assess where you are in relation to your retirement goals and recommend the right strategy for you to meet them. 

Get pension advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Craig Rickman is senior content writer at unbiased.co.uk. He has been writing about personal finance and wealth management since 2016, including four years as a journalist at the Financial Times Group. Prior to this, Craig spent eight years working as a regulated financial adviser. He holds the CII level 4 Diploma in Financial Planning.