That last year before retirement has a funny way of creeping up. You spend ages thinking of it as something in the distance, and then suddenly you're twelve months out and realising you haven't actually sorted anything. Most people don't get round to the big financial stuff until the final few weeks, and by then it often turns into a mad rush.
But if you give yourself this year to get things in order, you'll be in a much stronger position when the day actually comes. Here are five things you can do right now that will make a real difference.
Move #1: Check How You'll Access Your Pension
Before you do anything else, get clear on how your pension actually works. If you've got a defined contribution pot, you can usually take 25% tax-free from age 55 (that's going up to 57 from 2028), but how you take out the rest will have a big impact on your tax bill.
Book a free Pension Wise appointment through MoneyHelper. They'll talk you through annuities, drawdown and lump sum options based on your own numbers. Don't go off whatever you assumed a few years back. The rules change, your circumstances change, and what made sense then might not make sense now.
Move #2: Use Your ISA Allowance While You're Still Earning
If you've got any spare cash in the months before you stop working, get it into an ISA. That shelters it from tax on interest and growth going forward. Once the allowance is gone, it's gone, and your ability to earn drops the moment you retire.
Even putting a few thousand pounds into a stocks and shares ISA or a cash ISA can give you a handy buffer. And the best part is it won't eat into your personal savings allowance down the line.
Move #3: Think About Downsizing Early
Loads of people planning to retire say they'll downsize "eventually" but keep putting it off. The trouble is, selling a family home takes time. If you do it while you're still earning, you've got a financial safety net if anything goes wrong along the way.
And downsizing doesn't have to mean squeezing into a smaller flat in the same town. More and more retirees are now moving to residential park bungalows in the UK, which tend to have lower running costs and far less maintenance to deal with. If you're trying to free up equity and cut your monthly outgoings before you retire, it's definitely something to look into properly.
Move #4: Clear High-Interest Debt
Taking credit card balances or personal loans into retirement is one of the quickest ways to drain a fixed income. If you can, use any extra earnings this year to chip away at high-interest debt first. Even clearing one credit card could save you hundreds a year in interest, money that would otherwise come straight out of your pension pot.
If you've got multiple debts, focus on the ones with the highest interest rates first. That's usually store cards and credit cards. A 0% balance transfer can also buy you some breathing room, but read the terms carefully and make sure you'll actually clear it before the promotional period ends. The goal is to walk into retirement owing as little as possible on anything that charges you monthly.
Move #5: Build a Retirement Budget That Reflects Real Life
Go through your bank statements and work out what your actual monthly costs will look like once you've retired. Don't just guess at it. Actually make the calculations. Factor in everything from council tax and energy bills to those little subscriptions you forgot you were paying for. You'll probably spend less on commuting and work clothes, but chances are you'll spend more on heating, hobbies and days out.
It helps to run this budget for two or three months while you're still working, so you can see where the numbers land in practice. A lot of people are surprised by how much they spend on things they'd considered tiny. And if there's a gap between what's coming in and what's going out, you've still got time to adjust before the salary stops.
What Your Last Working Year Really Comes Down To
Retirement doesn't have to be a scary drop-off if you've put some thought into it beforehand. What you do in these twelve months will shape how those first couple of years go, and that early stretch really does set the tone for what comes after.
The common thread across all five of these moves is timing. Each one gets harder or more expensive the longer you leave it, and none of them requires anything drastic. Start with your pension, work through the rest, and you'll walk into retirement with a lot less on your plate and a lot more confidence in your numbers.
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