A secure pension income for life is no longer a reality for most people. Whilst some retirees are fortunate enough to have built up a substantial defined benefit pension, the majority will need to manage their retirement carefully, drawing an income from different sources.
In the early years of retirement, the focus is on adjusting to your new lifestyle and ensuring you have enough income to cover your expenses. You might also want to travel more and try new hobbies.
In later years, your concern may shift to care costs and passing on wealth to the next generation.
It can be challenging to balance these priorities and ensure that you can achieve your goals without running out of money. So how can you preserve your wealth in retirement and ensure your money outlives you?
Have a Plan
The starting point is understanding what you would like to achieve. To do this, you will need to have a rough idea of your spending requirements. For example:
- Essential living costs
- Ad hoc capital expenditure, such as home maintenance or replacing cars
- Discretionary and luxury spending
- Gifts
- Medical and care costs
You should also work out your various income sources, such as:
- Scheme pensions from your former employer
- The State Pension
- Rental income
- Investment income
Finally, you should also list any cash, investments, and pensions that you could use to fund your retirement. If you still have a mortgage, don’t forget to account for the monthly repayments or clearing the capital.
A cash flow plan can help you determine whether your retirement goals are sustainable based on the income and assets you have available.
Keep Enough Cash
As an absolute minimum, you should aim to keep an emergency fund of around three to six months’ expenditure to cover any unexpected bills or urgent repairs.
In addition, you may find that you need to top up your income from capital, either on a regular basis or ad hoc.
Selling investments at short notice can impact your long-term returns, particularly if the market takes a downturn. It is far more efficient to keep a cash buffer so that any investment encashments are planned well in advance.
If you are investing a lump sum, be careful about investing any capital that you are likely to need within five years. Otherwise, if the market dips (as it does regularly), your portfolio will potentially have less time to recover.
Invest (and Disinvest) Tax Efficiently
You don’t need to start drawing your pension immediately when you retire. In fact, it can be far more tax-efficient to leave it invested and use other assets instead.
Pensions can be passed on to your beneficiaries free of income tax if you die before age 75 (making them potentially useful for estate planning). After age 75, your beneficiaries will pay income tax at their own personal rate.
Note: from 6 April 2027 there are planned changes which may bring unused pension funds within the scope of inheritance tax, so these rules may evolve and individual advice is particularly important.
Additionally, you should consider continuing to use your ISA allowance for retirement if you can. Moving assets from investment accounts into an ISA can potentially make your portfolio more tax-efficient over time.
Everyone’s situation is different. As an approximate guide, here are some accounts that could be drawn from in retirement (the order depending on your unique circumstances):
- Cash
- Non-tax-advantaged investment accounts (aiming to keep the gains realised within your Capital Gains Tax exemption)
- ISAs
- Pensions
Diversify Your Portfolio
Unless you plan to buy an annuity, you will still need to hold some form of investment during your retirement.
Your objectives will probably have changed, as the focus will be on capital preservation rather than accumulating wealth. This means that you will probably want to take less risk than someone who is starting to invest for the first time.
But there is no such thing as a no-risk investment. Cash does not fluctuate with the market, but at current interest rates, it is unlikely to hold its value when inflation is taken into account.
Bonds are less volatile than equities, but are still sensitive to market movements.
Property funds can add diversification to your portfolio, but often suffer from liquidity problems when the market falls.
Equities are known to offer one of the best chances of beating inflation and growing your portfolio over the long term, but are more susceptible to daily fluctuations.
A combination of asset classes and a wide variety of different investments can help to preserve your wealth and manage risk. This might include a modest selection of ‘higher risk’ assets as well as more stable investments.
Keep an Eye on Your Budget
Tax and investment planning only go so far. It’s also important to stick to the plan, as overspending can limit your options later on.
A cashflow plan is extremely useful when you retire, as it will give you an idea of whether your retirement goals are achievable, or prompt you to rethink your priorities.
But this involves a number of assumptions around inflation, investment returns, health, and life expectancy. We can make reasonable guesses, but the only thing we can say with certainty is that not one of these assumptions will be accurate.
Life happens, and sometimes we need to spend more than we expect. Sometimes the market falls and takes a few years to recover. These blips should not derail a financial plan, but should be built in with plenty of contingency.
If you regularly review your plan, your budget, and your investments, it is easier to make small adjustments and correct your course. A good financial adviser can help you, not only with the technical aspects of investment and retirement planning, but also by holding you accountable and keeping you focused.
Please do not hesitate to contact a member of the team to find out more about retirement planning.
The content in this article was correct on 11/11/2025.
The financial conduct authority does not regulate estate planning and cashflow modelling
The value of your investment can go down as well as up and you may get back less than the amount invested
You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on savings, pensions, investments, mortgages, protection equity release and estate planning for teachers and non-teachers.
Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.