My Financial Life – Enjoying your 60s

As part of AJ Bell’s Money Matters campaign which aims to help more women become empowered to live their best financial lives, we’re putting together a series of articles breaking down some of the particular considerations depending on your age.

This article focusses on a hugely important and pivotal decade: your 60s.

It’s the decade you’ve probably been thinking about for years and hopefully have been saving up for.

We know the gender pension gap is real and far too wide for comfort, especially because women still live longer than men, but even as you approach state pension age, it’s not too late to take control. In fact, it’s more important than ever.

The first thing to do is actually work out what you have in your pension pot - and we know that a third of women surveyed for our Financial Wobbly Bits survey didn’t have a clue how much they had, and more than half worry that they won’t have enough put by to live comfortably.

Thanks to a changing work environment, more women coming into their 60s today won’t have to rely solely on the state pension. But we also know that half have never paid more than the minimum contribution required - one of the reasons that, on average, woman have £16,415 less in their pots than their male counterparts.

But there’s a lot to think about before you swap your workplace wardrobe for your gardening gloves.

The ideal retirement age will be different for everyone, and we know that by the time they reach their 60s, a lot of women have already stepped back from paid employment because of the impact of the menopause or because they’ve got too many other responsibilities. We know many women in their 60s find themselves sandwiched between caring for elderly parents and grandchildren. Even if they are able to keep working, they might have to cut back their hours, which is a double whammy as they often find themselves out of pocket, especially when it comes to providing free childcare.

No one wants to say no to helping out their children, but it is worth considering asking to be reimbursed for expenses like nappies and food; it will still be much cheaper for them than having to fork out for childcare.

And remember, if you are caring for under 12s and you have holes in the National Insurance contributions you may have amassed over the years, make sure you let HMRC know, because you’ll be able to claim credits to fill those holes. It’s also worth flagging that until 5 April 2025, you can “buy” additional years all the way back to 2006. After then, you can only fill in gaps from the previous six years.

It won’t be right for everyone but with many women working part-time or taking time off to look after children, they could find they haven’t amassed enough contributions to qualify for the full state pension, as you need 35 years.

For many people, reaching state pension age is that magic moment, but it’s worth making sure you know exactly when that is for you. People entering their 60s now won’t be able to claim the state pension until they turn 67, and those currently aged between 63 and 64 will very likely find themselves caught up in the transition period as the age changes from 66 to 67 (due to take place between 2026 and 2028).

Contrary to popular belief, you don’t have to retire when you reach that figure, whatever it is, and you don’t have to start collecting your state pension then either.

If you are still working full-time, it’s likely to make sense from a tax perspective to delay taking your state pension and that delay, as long as it’s over 9 weeks, will mean your state pension will be worth more by the time you finally take it. It increases by the equivalent of 1% for every nine weeks you defer, or 5.8% for a full year – right now that’s an extra £12.82 a week if you’ve deferred for a full 52 weeks.

And if you're still working, chances are you’re also still paying into a workplace or private pension. You can take 25% tax free-from your private pensions and claim the state pension without triggering the MPAA, which is the cliff edge that alters the amount you can pay into a pension every year from the usual £60,000 annual allowance to just £10,000.

Working full or part-time through your 60s and beyond is becoming increasingly common as people live longer, healthier lives.

But there will come a time when you want to slow down or step off the hamster wheel entirely, so it’s important to take steps as early as possible to prepare your finances for that point.

Do you want to swap your pension pot for an annuity, an insurance product that guarantees you and income for life, or would you rather have the flexibility of staying invested and just taking (drawing down) the amount you want when you want it – something that also gives you the benefit of a longer time horizon (and more time for your pot to grow)?

A Self-invested personal pension (SIPP) is a product that can give you that flexibility and offers you lots of options to invest in.

Everyone will have a personal preference, but if you want to take all your pot in one go, either to buy an annuity or to take it all as cash, then you might want to reduce your investment risk as you approach that date, sometimes referred to as “life-styling”. Stock markets can be volatile, particularly over the short term, and you don’t want to become a hostage to fortune.

Everybody’s retirement will be different so its important to remember there are no wrong choices as long as you’ve given yourself good building blocks.

Your 60s might seem as daunting as they are exciting, but the key is not to get overwhelmed, to take slow but steady steps, and to look at your financial situation from all angles. We know there is a gender pension gap, so think about the property you live in, other savings or investments you might have, and if you have a partner, talk to them about how your finances will work together, and plan early.

My Financial Life - 60s checklist

1. Check your National Insurance contributions - have you qualified for the full state pension?
2. Tot up your pensions - do you know where all your pots are and could you bring them all together?
3. Plan ahead - do you have a clear idea of when you want to retire?
4. Think about your allowances and the taxman - remember your pension income is still an income.
5. Don’t get stressed - taking small steps can make a big difference.