What Does A Good Retirement Plan Actually Look Like?

When asked if they’re planning for retirement, most people will nod and happily say they have a workplace pension. Some may even say they also have an ISA or two. They could even have an idea of when they want to stop working.

But here’s a rather uncomfortable truth: that’s not a retirement plan. Whilst a good start, having a workplace pension and an idea of retirement dates sadly isn’t enough. In fact, you could say they’re just ingredients. Not a recipe.

So what is a good retirement plan? Here, we find out and explain why it’s more than just how much you’ve saved.

What most people don’t actually have is a plan

If you’ve got a pension pot, a healthy savings account or an intended retirement age in mind, it can be easy to assume that you’re basically all sorted for retirement. But those things on their own are not a plan. They’re merely parts of a retirement planning checklist.

That’s because they don’t tell you:

• How much income you’ll actually receive
• How long that income needs to last
• What happens if markets fall
• How your spending might change over time

A good retirement plan will bring all these ideas together and also answer one more vital question: how will my lifestyle be funded, year after year, for the rest of my life?

To answer that, we’ve broken down what a strong, resilient retirement plan includes in the sections below and why each part matters.

What a retirement plan is (and isn’t)

A retirement plan is a forward-looking strategy that links your money to your real life. It will cover:

• How you will build wealth during the years you work
• How you turn what you’ve saved into a sustainable income when you retire

Crucially, a retirement plan adapts and flexes as your life changes. It’s a plan that needs to be reviewed regularly and helps you make decisions with confidence. If you’ve ever wondered, ‘what is a retirement savings plan really meant to do?’ – the ability to flex is key.

What a retirement plan isn’t:

• A pension balance
• A single calculation
• A static document that never changes

The core components of a good retirement plan

Clear retirement goals

Every good retirement plan puts your lifestyle and how you want to live first. Ask yourself, what am I actually planning for? In answering that question you should consider:

• When do you want the option to stop working?
• How flexible are you on that date?
• What does a good life really look like to you?
• Will you travel?
• Do you want more time with family to help children or grandchildren?
• And where will you live?

Once you’ve thought about and answered these questions, you’ll be able to look at your pension and savings pot and see if the numbers you had in mind work for you. If you had started with simply looking at your pension pot balance, you could have been in danger of designing a plan that won’t actually deliver the retirement you want.

One useful exercise is identifying your personal “enough”. In retirement planning, understanding what “enough” looks like for you can be more valuable than endlessly chasing a bigger number. At what point would having more money stop materially improving your lifestyle, security or happiness?

Thinking about retirement in this way can help shift the conversation away from arbitrary savings targets and toward building a life that genuinely reflects your priorities.

A realistic retirement income plan

Realistic retirement income is often where plans fall short – and sadly, often realised too late. That’s because what matters in retirement isn’t how much you have; it’s about how much income your assets can provide, reliably and sustainably.

So, do you know how much income your plan is meant to produce? And where it will come from?

A strong plan will blend:

• Guaranteed income: i.e. the State Pension or defined benefit pensions
• Flexible income: i.e from ISAs, investments and drawing down a pension

Don’t forget your income needs will also change. In the first few years of your retirement, your spending will likely be higher as you will probably be more active, taking time out to travel and for your hobbies. You need to plan for the stages of your retirement as your needs will change over the years.

As a starting point, the Pensions and Lifetime Savings Association (PLSA) publishes Retirement Living Standards each year to help people understand what different lifestyles in retirement may cost. For 2025/26, the figures suggest a single person would need approximately:

• £13,400 per year for a minimum retirement lifestyle
• £31,700 per year for a moderate retirement lifestyle
• £43,900 per year for a comfortable retirement lifestyle

For couples, the equivalent figures are £21,600, £43,900 and £60,000 per year respectively. These are not personalised recommendations, but they can provide a useful benchmark when thinking about your own goals and expectations.

Importantly, even the full new State Pension for 2026/27 of £12,547.60 per year falls below the PLSA’s minimum standard for a single person. For most people, this means private savings and investments will still need to play an important role in funding retirement.

An investment strategy that matches the timeline

A good retirement plan will align your investment strategy with when you need the money, and how you spend it (i.e. a regular amount on a monthly basis, or larger, less frequent chunks of money). Your strategy needs to adapt as you approach retirement, given your tolerance for risk generally diminishes the closer your final working day comes.

However, you also need to consider your investment strategy while in retirement and drawing down a pension or withdrawing funds from other savings. Your short-term income, your medium-term spending and long-term growth all need to be balanced.

Tax efficiency across working life and retirement

Everyone needs to make use of their allowances to ensure their money is run tax efficiently. Doing so is imperative as tax affects:

• What you keep when you contribute to your pension
• What you lose when you withdraw funds from your pension
• What you can leave to your heirs when you pass away

If you ignore these factors when drawing up a retirement plan, you could potentially lose a large sum of money that you otherwise could have had in your pocket. When used properly, pensions, ISAs and other allowances can all work together to protect your money from the taxman.

One of the most common questions people ask is how to balance pension saving with ISA investing. Both can play valuable but different roles within a retirement plan.

Pensions benefit from upfront tax relief on contributions, tax-efficient growth and, usually, the ability to take part of the fund tax-free in retirement. For higher-rate and additional-rate taxpayers in particular, this tax relief can make pensions an extremely powerful long-term savings vehicle.

ISAs, meanwhile, do not offer upfront tax relief, but investments grow free from UK income and capital gains tax, and withdrawals are typically tax-free. ISAs can also offer more flexibility, as funds can usually be accessed at any age without the restrictions that apply to pensions.

Used together, pensions and ISAs can complement each other effectively. For example, some retirees may use ISA withdrawals to help manage their taxable income in retirement or fund irregular spending without pushing themselves into a higher tax bracket.

Tax planning has also become increasingly important from an estate planning perspective. Under current rules, pensions are often treated differently from other investments for inheritance tax purposes. However, from 6 April 2027, unused pension funds are expected to form part of an individual’s estate for inheritance tax purposes. For some families, this may significantly alter how pensions fit into their long-term legacy planning and retirement strategy.

A strong retirement plan isn’t built for best-case scenarios

Remember, your plan needs to account for all possible outcomes, not just the good ones. So you’ll need to factor in:

• Living longer than expected
• Inflation raising costs
• Any market downturns
• Healthcare expenses

By considering these when planning for retirement, you’ll have a far more flexible roadmap for when you stop working.

Retirement is no longer always a single date

For many people today, retirement is not a simple on/off switch. Increasingly, people are choosing to retire gradually, scaling back work over several years, moving into consultancy or part-time roles, or balancing work with travel, volunteering or caring responsibilities.

This can be especially relevant for business owners, self-employed individuals and senior professionals who may not want or need to stop working entirely at a fixed point in time.

A good retirement plan should therefore consider not just the moment you retire, but how the transition itself may look. A phased retirement can affect your income needs, tax position, investment strategy and even your sense of purpose and fulfilment.

Why do most plans fall apart?

We often see that, for the most part, people are good at saving for retirement and growing their wealth. The downfall comes when turning that wealth into income, without it running out. Common mistakes include taking out too much too early, failing to adjust spending, or reacting emotionally when markets fall.

Another common issue is relying too heavily on broad rules of thumb without reviewing whether they still reflect your circumstances. However, some benchmarks can still provide a useful sense check.

For example, some planners suggest aiming to have saved around three times your salary by your 30s, six times your salary by your 50s and roughly eight times your salary by your 60s. Others suggest increasing pension contributions over time, perhaps targeting around 10% of income in your 20s, 15% in your 30s and 20% in your 40s and beyond.

These figures are not personalised recommendations and should never replace a proper financial plan, but they can help people assess whether they may broadly be on track.

A good retirement plan evolves as your life does

Your life will follow a path that you haven’t foreseen yet, with plenty of bumps along the way. Your career may change, your health may change or your relationship may change. As a result, you need to review your retirement plan regularly to ensure it is adjusted in light of any changes. Life will often throw something unexpected at you – good and bad – so you need to ensure your plan still fits the life you are leading.

Ask yourself: if you haven’t revisited your plan over the years, is it still really your plan?

It’s also important to remember that retirement rules themselves can change over time. Currently, most personal pensions are not normally accessible until age 55, but this is scheduled to rise to age 57 from April 2028. Likewise, State Pension ages have gradually increased and may continue to evolve in the future.

If your retirement plan is built around accessing money at a certain age, these legislative changes can materially affect your timeline and financial planning decisions.

Is your retirement plan a good one?

As there is no one answer to what makes a good retirement plan, using a quick retirement planning checklist can help:

• Do you know how much income your plan is meant to provide?
• Do you understand where that income will come from?
• Have you considered tax, inflation and longevity risks?
• Do you know what you’d change if markets fall?

If you’re unsure about any of these questions, it’s worth reviewing your plan to gain some clarity.

When professional advice makes the difference

Retirement decisions are complex. Timing, tax and income choices matter and can have huge repercussions on your lifestyle in retirement if not accounted for properly. Good advice can ensure you have a plan that works in the real world, for you specifically, when your retirement comes.

Research from organisations including the International Longevity Centre has consistently found that people who receive regulated financial advice often build greater long-term wealth, feel more financially confident and are less likely to make reactive decisions during periods of market volatility.

The value of advice is not just about technical expertise. It is also about creating structure, accountability and clarity around decisions that may shape decades of your life. Contact us today so we can help you plan with confidence for your financial future.

First Wealth is not responsible for the accuracy or content of third-party sources. 

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  

The Financial Conduct Authority does not regulate estate planning or tax planning.

This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. 

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.