Retirement hierarchy of needs

Retirement is the perfect opportunity to think about financial priorities and categorise expenditure.

Remember that some expenditure may disappear at retirement. For example, the mortgage or the costs of commuting. Equally, new expenses may arise.

Here’s a way to prioritise expenditure to help your clients create a comfortable retirement:


Entering retirement debt free is a liberating experience and should be a major priority.

The interest payable on debt is likely to be higher than could be achieved by investing money, so it makes sense to clear debt wherever possible. 

Essential income

These are expenses that have to be met. For example, gas and electricity, food and clothing.

Ideally, essential expenses should be covered by a reliable income like a guaranteed income for life.

Just in case fund

From time to time we all get caught out by unexpected expenditure (housing repairs or a car breakdown, for example).

A rainy day fund can help. Six times essential monthly income is often considered a reasonable amount to keep aside (ideally in a low risk fund or savings account).   

Freedom income

This is for some of life’s pleasures. Eating out, cinema or theatre visits.

As this is discretionary expenditure it doesn’t have to be funded by secure or guaranteed income.


Many retirees are keen to help their children and grandchildren with gifts. Perhaps to fund education or help with a deposit on a home.

Gifts can also potentially reduce Inheritance Tax.  


Once the other layers of income are in place, any excess can be used to spend on life’s luxuries. Perhaps a sports car, dream holiday or a lifetime ambition.

Whatever it is, now’s the time to make it happen.