Retirement can last for 20 years or more depending on when you retire and how long you live. Your income in retirement is likely to come from several sources. These include your State Pension, other pensions you might have built up while working and any savings and investments. Before you give up work you need to make sure you’ll have enough money to live on throughout your retirement.

How long does your money need to last?

You’ll need to think about how to make the money you’ve got last for the rest of your lifetime.

Most people underestimate how long they’re likely to live. To estimate your life expectancy, you can use the calculator on the Office for National Statistics website

This can help you plan how long your pension might need to last. But bear in mind that lifestyle choices and other factors might affect how long you live.

If you live longer than you expected, you could find yourself struggling financially later in life. You don’t want to use up your money too quickly and risk not having enough later on. On the other hand, you don’t want to live more frugally than you need to.

You also need to consider how inflation can affect how much money you’ll need to live on and how long your savings will last.

How long will your money last?

As few of us know how long we’re likely to live, this is difficult to plan.

Generally, it’s a good idea to make sure have enough guaranteed income that will pay for the essentials (such as your home, food and bills) for the rest of your life.

This might come from one or a combination of different sources. Find out more about secure income below.

Inflation

Prices tend to rise over time. So if you want to maintain your standard of living you need your retirement income to keep pace with inflation.

You might be able to get a guaranteed pension income that increases in line with prices from your personal or workplace pension.

The State Pension increases by at least the rate of inflation each year. And if you get a retirement income from a past employer, this often rises by the rate of inflation or a set amount each year.

If you rely on savings and investments to boost your income, you’ll probably need to increase the amount you take out each year if you want your income to go as far as it used to.

If you take more income than your savings and investments earn each year in interest, you will gradually eat into your capital. This means you risk running out of savings.

Secure income

This is income you can rely on for a set period or the rest of your life. The State Pension is guaranteed for life.

You might also be due pension income from a former employer if you were in a defined benefit pension scheme. This will provide you with a regular income for life.

You might have contributed to an employer or private pension scheme where you built up your own pension pot.

If you need to top up your guaranteed income, you could use all or some of any pension pots to buy an annuity.

Income from other sources, such as rental income, might provide a regular income but might not be fully secure. This means you might have times when you have less income coming in than you need. Consider how this might affect you.

Flexible income

Do you have enough guaranteed income in retirement? Then you might choose to leave any pension pots you’ve built up invested and take a flexible income or lump sums from it as and when you need them.

Your pension pot has the opportunity to grow but there’s a risk that your investments might fall in value.

If you rely on this to provide you with an income, you might have to reduce the amount you take if your pot falls in value. Otherwise, you risk your money running out if you live for longer than you expected.

You can also take a flexible income from other savings or investment, but you need to monitor how much you take to make sure they last.