The worst money mistakes you can make in your 60s and 70s – and how to avoid them

Reaching retirement with a healthy savings pot is only half the battle. Taking your pension tax-free lump sum without a plan, leaving it too late to downsize and failing to claim the benefits and discounts you are entitled to are among the common mistakes that catch even careful savers off guard. Here are the retirement later-life money traps to watch out for. Shorts Leaving it too late to downsize Downsizing to a smaller, more manageable home when you get older can not only make life easier in your later years, it can also release cash that could boost your retirement income. But many people struggle with the decision and, in hesitating, end up leaving it too late – something that happened to Antonella Lazzeri’s parents. “My mother thought bungalows were for old people,” she says, so they never left the family home. “For the last six years of their life they lived in one downstairs room – the lounge diner – with my mother’s bed in the dining room and my father on the settee. They could not get upstairs. “My mum bitterly regretted not downsizing.” Antonella, 63, from Milford on Sea, believes failing to downsize significantly affected her parents’ quality of life in their final years and is determined not to repeat their mistake. Antonella Lazzerri doesn’t want to make the same mistakes her parents did now she is in her 60s “Having seen what happened to them, I fully intend to downsize to one level in the next five years. I believe their health would have been far better if they had been able to live on one floor, and it would have helped their finances too.” Antonella’s parents faced the high costs of maintaining their large home, even when they couldn’t use much of it. This included paying a cleaner and a gardener. Downsizing would have freed up cash for them to be able to enjoy their final years more. “My dad might have been able to achieve his dream of buying a camper van and going round Europe,” says Antonella. Taking your tax-free sum without a plan Your pension is likely to be the largest amount of money you’ve ever saved. When the time comes to access the pot, it can be tempting to take the 25 per cent tax-free lump sum just because you can. But don’t take it without a clear plan to use the money. Any money you take out of your pension will reduce its future value – and that has a direct impact on your lifestyle in retirement. For example, if someone has a £200,000 pension pot, takes a £50,000 tax-free lump sum and doesn’t make any further contributions to a pension, when they retire at 67, they will have around £164,962, according to PensionBee’s retirement calculator. If they had left that lump sum invested until 67, the pot would be worth £218,660 – allowing them to take almost £55,000 tax-free at that point. Or, someone could leave it invested and take a smaller regular amount as tax-free income in the early years of retirement. “Your pension needs to provide an income for the rest of your life so it’s important to make sure you won’t run out of money,” says Richard Watkins from financial planning firm Continuum. Failing to plan how your income will fluctuate One of the biggest mistakes people make is assuming that retirement spending is simply about drawing a fixed income each year. Marianna Hunt, associate director at Fidelity International, said: “In reality, it’s a balancing act between spending enough to enjoy retirement while you’re fit and healthy, without risking running out of money later in life.” Retirement spending isn’t usually a straight line. Experts refer to the general pattern as the “retirement smile” as spending tends to be higher in the early years when people travel and make the most of no longer being in work. It then slows in the middle years, before rising again later in life when health and care needs increase. “Retirees should build a plan that reflects this changing pattern,” says Hunt. For many people, that means securing enough guaranteed income to cover essential bills through your state pension, defined benefit pension, a lifetime annuity or a combination of the three. You could then use pension drawdown for your discretionary spending. Not getting financial advice when you retire When you stop working, you are likely to have your retirement savings sitting in accounts that you need to turn into an income to last you the rest of your life. This is a huge shift to manage, and turning investments into income isn’t something most of us have any experience of. The mistake here is not getting expert help. It needn’t be expensive. Anyone over 50 can get a free appointment with Pension Wise. David Smith, 66, from Poole, retired from work as a business consultant in 2020 and divorced shortly afterwards. “I realised that the retirement I’d spent decades planning no longer existed,” he says. As a result, David didn’t have a clear plan for his retirement, and delayed getting advice. David Smiths regrets not taking financial advice sooner “I don’t think I was consciously avoiding financial advice. I was avoiding making some difficult life decisions,” he explains. “My retirement plan had been built around life as a couple and I had to rethink almost everything – where I wanted to live, how I wanted to spend my time, what I wanted money to do for me, and ultimately what I wanted the next 30 years of my life to look like.” When David finally connected with a financial adviser at Flying Colours, he found the expert help brought him clarity. “It fundamentally changed how I think about money. I’m thinking much more about how to use wealth intentionally to support the life I want to live.” Not claiming everything you are entitled to Many people in their sixties and seventies don’t realise that their age can make them eligible for a raft of benefits and discounts. “Around 900,000 pensioner households are missing out on pension credit, worth roughly £2,500 a year,” says Maike Currie, VP of personal finance at PensionBee. Plus, the benefit is “a gateway to further help like council tax support and a free TV licence for the over-75s”. Pension credit is a means-tested benefit that can top up your state pension if you are on a low income in retirement. Attendance allowance, for people over state pension age who need help with personal care, is another benefit that often goes unclaimed. Beyond benefits, there are also numerous discounts many people never use. Anyone over 60 in Scotland and Wales – it’s 66 in England – can claim a free bus pass. Meanwhile, you can get a 60+ Oyster card which provides free travel in London. Many companies also offer discounts to the over-60s from cut price holidays to cinema tickets and museum discounts.