What will you spend in retirement? How to plan for needs, wants and dreams. 

When people start planning for retirement, one of the first questions they ask is: “How much do I need to retire?”  

Whilst that’s a vital question, it often overlooks a more practical and personal one: “What will I actually spend in retirement?”  

Understanding your likely expenses across essentials, lifestyle choices and future aspirations can help you build a retirement plan that is both realistic and fulfilling. 

In this article we explore… 

…a structured way to plan your spending using a framework known as Needs, Wants, and Wishes. This simple but effective approach can help you visualise how your money might be used in retirement and guide decisions about how best to draw income from pensions, savings, and investments. 

Why retirement spending needs a clear plan

Retirement isn’t a one-time financial decision. It’s a phase that can last 25–30 years or more, during which your spending patterns are likely to shift. Planning helps you avoid the extremes of under-spending and over-spending, both of which can reduce your quality of life. 

Your income in retirement may come from various sources: the State Pension, workplace pensions (including defined benefit and defined contribution schemes), ISAs, cash savings, rental income or part-time work. Understanding how much you need, and when, helps determine how to use these sources efficiently. 

The Needs, Wants and Wishes framework 

This framework is a practical way to categorise spending priorities: 

• Needs are your essential expenses – things you must pay to live comfortably and safely. This includes housing costs (like rent or mortgage), utility bills, groceries, transport, and basic insurance. 

• Wants are the things that improve your lifestyle but aren’t strictly necessary. Think meals out, travel, entertainment, new gadgets or hobbies. 

• Wishes are your long-term or aspirational goals. These might include helping children or grandchildren financially, taking a once-in-a-lifetime trip or donating to causes you care about. 

This method helps separate core requirements from discretionary and aspirational spending, making it easier to design a sustainable retirement income plan. 

Step 1: estimating your needs 

Start by calculating your fixed recurring costs, the things you’ll still be paying whether you’re working or not. These typically include: 

• Housing (rent, mortgage, service charges) 

• Council tax and utility bills 

• Food and household essentials 

• Insurance (home, medical, car) 

• Transport (car costs, public transport, taxis) 

Make sure to factor in inflation, especially if you’re retiring early or expect a long retirement. Even modest inflation can significantly increase your costs over time. 

Ideally, your needs should be covered by secure, predictable income sources. This includes: 

• State Pension (currently around £11,973 a year if you qualify for the full amount) 

• Defined Benefit (DB) pensions, which pay a guaranteed income for life 

• Annuity income (if purchased) 

• Rental income (if reliable) 

Step 2: mapping out wants 

Lifestyle spending can be higher in the early years of retirement, sometimes called the active years. People tend to travel more, take up new hobbies or spend more on leisure. 

Examples of wants might include: 

• UK or overseas holidays 

• Dining out and takeaways 

• Club memberships or subscriptions 

• Home renovations 

• Leisure equipment (new car, bicycles, campervan) 

These expenses can be funded from more flexible income sources, such as: 

• Drawdown from defined contribution (DC) pensions 

• ISA withdrawals 

• Part-time work 

• Investment income 

Since these funds are usually more exposed to investment markets, the key is drawing from them in a way that doesn’t jeopardise future income. 

Step 3: planning for wishes 

Wishes are typically one-off or future-oriented goals. While not essential, they can form a powerful part of your retirement motivation and purpose. Examples include: 

• A major family gift (e.g. house deposit support) 

• Helping with grandchildren’s school fees 

• A round-the-world trip 

• Leaving a financial legacy 

These goals might not need to be funded immediately, but it helps to plan for them upfront so they’re achievable without compromising your day-to-day income. 

Spending patterns over time 

It’s natural to assume your spending will be consistent, but research shows that spending often changes through retirement. There are usually three broad phases: 

• Early retirement (ages 55–70): active years, often with higher discretionary spending 

• Middle retirement (ages 70–80): spending often moderates as travel and lifestyle needs reduce 

• Later retirement (80+): lower discretionary spend, but possible increase in health or care-related costs 

Reviewing and adjusting your plan regularly ensures it continues to reflect your actual needs at each stage. 

Aligning your income sources 

Not all income is created equal. Some sources, like the State Pension or a final salary scheme, are guaranteed. Others, like invested pensions or ISAs, may fluctuate in value. 

By using the Needs, Wants, and Wishes model, you can match income types to spending categories: 

• Needs: cover with guaranteed or low-risk income 

• Wants: Uue flexible invested income sources with appropriate risk 

• Wishes: fund with surplus assets or planned withdrawals, perhaps later in retirement 

This alignment helps manage risk and provides reassurance that your essentials are always covered. 

Why personalised advice matters 

While guidance tools and calculators can help you estimate retirement costs, they cannot fully replace the insight of a qualified financial adviser. Everyone’s retirement looks different based on their health, goals, financial history and family needs. 

A financial adviser can help you: 

• Estimate your spending needs with more precision 

• Design a tax-efficient withdrawal strategy 

• Model how long your money might last under different scenarios 

• Adjust your plan if circumstances change 

Final thoughts 

Planning how you’ll spend in retirement is about more than numbers; it’s about aligning your resources with the life you want. Using the Needs, Wants and Wishes framework can give clarity and structure to your thinking, helping you build a strategy that supports your future lifestyle, whatever shape that takes. 

Talk to Pension Sense 

If you’re thinking about retirement and want tailored expert support, we provide personal financial advice to help you plan a retirement income that fits your life. Whether you are retiring soon or already drawing from your pension, we will help you make decisions with confidence. 

We provide: 

• Personalised financial advice tailored to your retirement goals 

• Clarity around your pension and income options 

• Straightforward, jargon-free guidance backed by experience 

Discover more on this website about our services and how we do things. If you are ready to start your journey towards a more secure retirement: