How your money changes in retirement

This week’s Loose Change comes from Erith who blogs at Cracking Retirement about having fun after retiring, making the most of her money, travelling far and wide and enjoying her hobby: bashing metal.

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The long awaited day has arrived, you say farewell to your colleagues and that’s it. A whole new life awaits you. You know it’s going to feel really strange. Your life will no longer be driven by the alarm clock. Life is one long weekend. Where before, you used to have to squeeze everything into two days, weeks stretch ahead of you with no structure.

Before you get to the big retirement day, you will hopefully have done a little planning. You know how much you have got saved, you know what your pension will be (if any!), but you don’t really understand what your outgoings will be.

The following is based on my five years of retirement. Our income in retirement went down considerably, but a lot of expenses went away at the same time. We certainly spend 50% less than when we were working.

Costs that go down

• Lower travel costs. No more commute to work. Even better, if you are over 60 in Scotland, Wales or London, you get a free bus pass. It is one of the best gifts you will get from the government! Unfortunately for those in the rest of England, it doesn’t arrive until you hit the female state pension age which will be 66 from next year.
• No more work clothes. You’ll still need casual clothes, but if I am anything to go by, they just keep on going! My total clothes spend from January to April 2017 has been £7.99 for a scarf. (Though I am usually a bit scruffy!)
• More home cooking. You now have to make lunches, but home-made soup and a roll don’t cost too much. This is balanced by being able to go to the shops when you know you will get the best reductions. You can also be totally flexible by what is on offer that day. We had our main meal at 4pm the other day. Why? I had been to the supermarket and they had a hot cooked chicken marked down from £5.90 to £2.50. I dived home, put a few veg on, and we ate 30 minutes later. There was enough left for several lunches. You can also do a lot more home cooking because you have the time.
• Casual spending. Gift collections, eating out through the week because you are too tired to cook. Going for a beer with your colleagues after work, canteen lunches. Staying away from home, and buying extra things. Taking your turn at buying the coffees in the office. Snacks at 4pm because you need a boost…
• More time to do things yourself. We no longer get milk or newspapers delivered. We don’t eat ready meals. We cook from scratch. We walk or take the bus, where previously we would have used the car. We do our own garden, paint the fence, do the small maintenance jobs ourselves.

Costs that go up

• Heating bills. You are now in the house a lot more. Even allowing for putting an extra jumper on, our heating comes on for an extra 1-2 hours in the middle of the day, which it didn’t do previously. (We do live in Scotland!)
• Holiday travel. Just about every pensioner I know travels a lot more. They go and see friends and family because they have more time. They go abroad, take cheap hotel breaks etc. Even though you can now choose to travel at non-peak times, you will holiday more often, and for longer. I average about 5 or 6 trips a year, the longest was 6 weeks.
• Time to meet your friends. It might involve a coffee or a meal, a trip to a gallery, the zoo, the cinema. You may have entrance costs, as well as a coffee/meal. My husband and I generally meet up (separately) with friends once or twice a month. You can ease the pain a little. Lunches are a lot cheaper than dinners – you also don’t drink as much. There are a lot of lunch offers around – 2 courses for £10 etc.
• Hobbies  You now have the time to indulge in your hobbies – that might be more rounds of golf (green fees), raw materials (I make silver jewellery), gardening (plants). If you’re a collector, you have time to find things that you need for your collection.

What stays pretty much the same?

• Car costs. If you have a car, it still needs maintenance / replacing every now and then. Assuming you didn’t use it for commuting, you’ll still use the same amount of petrol, maybe even a little more. Ours stayed pretty much the same.
• Large home maintenance jobs. You’ll still need to get the roof checked, plumbing fixed etc
• Large purchases. Computers, televisions still need updating/ replacing from time to time
• Insurance – but you do have more time to shop around. See my article on how I saved money on home insurance.
• Things break. We needed to replace our electric shower last year…

What you can do in advance

We made some large changes in the house a couple of years before we retired: new doors, windows, kitchen. We shouldn’t need to do anything much for another 5 years at least.

We got finanically organised, sorted out our savings, investments, pensions. We also started living on our anticipated income a couple of years before we retired. This allowed us to be sure we could afford to retire.

As we both retired early, our income will be changing over several years. Year 1 – my work pension, Year 3 – husband’s work pension, Year 5 – husband’s state pension, Year 10 – my state pension. The state pensions coming it will give us a bit of an inflation buffer.