What should I do with my money as soon as I retire?
Written by Boring Money
21 Sep, 2026
Retirement is worth celebrating, but from day one you're managing your own income for what could be 25–30 years - so a few early decisions matter more than they might feel like at the time. Boring Money's five essential moves: build a cash flow forecast, review and rebalance your investments, check where you stand on Inheritance Tax before the 2027 rule change, decide how (and when) to take your 25% tax-free lump sum and put a financial plan B in place.
Your pension, savings and any other income sources need to stretch across a retirement. That means, for most of us, this is not the moment to wing it. Here are five smart, strategic steps to take when you’ve just retired.
1) Do I need a cash flow forecast when I retire?
Yes - a retirement cash flow forecast maps your income and spending year by year, so you can see whether your money will last.
Why does all this matter? Because your retirement spending is unlikely to be consistent. You’ll probably spend more in the early years - ticking off the bucket list, helping out the kids or redoing the kitchen - before easing into a slower pace (and lower spend). Then, later in life, costs may rise again if you need care or support.
This pattern is often called a U-shaped retirement spending curve, and without a plan to manage this, it’s easy to overspend early on or underestimate the cost of later-life needs.
If Excel sends you running for the hills, a qualified financial adviser can build a detailed forecast using advanced cash flow modelling and analysis. Although it's always wise for those with large The total value of all an individual's assets and liabilities, including property, investments, and other belongings at the time of their death. Essentially the sum of everything you own. or complex finances to get financial advice, cash flow forecasts aren't just for the wealthy and can help anyone in the run-up to retirement understand their income needs and plan accordingly.
Cash flow planning is critical in helping the client understand how best to utilise their accumulated wealth to meet their retirement objectives. It also helps to identify the investment return required, and by extension, the investment risk level needed to ensure the risk of running out of money in retirement is minimised. Cash flow planning is instrumental in helping the client ‘visualise’ retirement planning advice.
Financial advice: How it works, do you need it, and what to expect
2) Should I still be invested after I retire?
Yes - most retirees need their investments to keep generating income and growing, not just sit still.
The starting point is to identify how much income you really need and ensure you’ve got a safe, reliable way to generate it. For most people, that will include the State Pension, which, for the current 2026/27 tax year, pays £241.30 per week (or £12,548 per year) if you’re entitled to the full amount.
But unless you’re planning a very(!) frugal retirement, you’ll probably need to top this up. That’s where your workplace and/or personal pension and other investments come in to supplement your income. The exact make-up of your An investor's total collection of investments, such as all the shares, bonds and funds they own. might need to be different depending on your unique needs and goals, but may include the following:
📌 Regular portfolio reviews are vital
You should aim to review your investment portfolio at least once a year, and ideally more often if markets are choppy. If necessary, rebalancing your portfolio ensures you’re not accidentally taking too much (or too little) risk. A well-diversified approach is key. And if you're unsure? As always, get professional advice.
Portfolio rebalancing: What it is and how to do it
3) Will I have to pay Inheritance Tax in retirement?
Possibly - and it's becoming more likely.
Inheritance Tax (IHT) is often overlooked, but this most-hated tax can be a nasty - and costly - surprise for your loved ones. And more families than ever before are in the firing line.
HMRC recorded IHT receipts of £871 million in June 2026, the highest monthly total ever recorded and a record £8.5 billion across the 2025-26 tax year.[1] The OBR's forecasts imply that rising house prices, rule changes and years of allowance freezes could bring close to 1 in 10 UK estates (9.7%) into the IHT net by 2029–30.[2]
Currently, the standard nil-rate band is £325,000, and the residence nil-rate band (RNRB) adds an additional £175,000 when leaving your home to direct descendants. That gives a combined tax-free allowance of £500,000 per person (or £1 million for married couples/civil partners). Everything above that? A painful 40% tax on your estate.
Right now, pensions are a huge advantage in estate planning. They're not counted as part of your estate, so can be passed on tax-free if you die before age 75 (with Income Tax charged to beneficiaries if you die after 75). But from April 2027, things change:
⚠️ Upcoming changes to pensions under IHT rules
HMRC has confirmed that pensions will fall under IHT liability from the 2027-28 tax year onwards. That means:
- Your entire pension pot could become part of your estate for IHT purposes
- The once-major benefit of pension-based IHT sheltering is reduced
- Your estate could be pushed over the threshold simply because you didn’t drawdown enough of your pension
If you’ve been holding off on pension withdrawals to minimise IHT, now’s the time to rethink that strategy. It may be more tax-efficient to start strategic drawdowns now, rather than leaving a large untouched pot that becomes IHT-liable in just a couple of years.
The bottom line is that IHT planning can be pretty technical, so make sure to read up on the details. Many people also find that having a financial adviser to help them do the number-crunching is a worthwhile venture.
Strategies to reduce your Inheritance Tax bill
4) Should I take my 25% tax-free pension lump sum all at once?
Not necessarily - most UK pensions let you take 25% tax-free, but you don't have to take it all in one go.
Deciding whether (and how) to take your lump sum used to be a more straightforward process, but with the 2027 pension IHT change on the horizon, it's an increasingly complicated and important choice.
Remember, you don’t have to take the whole 25% in one go - you can take it in smaller chunks, which can help you avoid increasing your Income Tax liability, and plan out a more consistent income stream over a longer time period.
Once again, a financial adviser is the one to turn to if you’re not sure that taking a lump sum makes sense for you. They can fully assess your finances and help you to decide if it’s an appropriate decision or if the tax implications aren’t worth it.
25% tax-free lump sum: Options, considerations, and expert guidance
5) What if my retirement plan doesn’t work out as expected?
It's worth having a financial plan B before you need one.
Even with the best-laid retirement plan, life throws curveballs. Think of this as your retirement emergency plan. You might never need it, but knowing it's there can offer peace of mind.
Having options gives you control. And you may find that a bit of extra work or side income helps keep you feeling engaged and financially secure, especially if markets or costs suddenly take a turn for the worse.
Final thoughts
The early years of retirement can be some of your most exciting, but also the most financially pivotal. The choices you make now about pension withdrawals, investments, and estate planning will shape your financial security for the decades ahead.
So take stock, stay informed and don’t be afraid to bring in an expert to help. After all, you worked hard for this - the last thing you want is for poor planning or new tax rules to undo a lifetime of efforts.
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