5 questions to ask yourself when considering retirement

Helen Morrissey · Pensions columnist

Tue 10 February 2026 at 3:00 pm GMT+9 4 min read

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If you are thinking of retiring in the near future, then you will need to make some important decisions around how to take your income.

This is one of the biggest financial decisions you will ever make, and yet data from Hargreaves Lansdown shows that less than half of people understand their options. Awareness is slightly higher for the over 55s – but not by much – it means there’s a real risk of people sleepwalking into bad decisions.

This can include buying an annuity that is not right or drawing down too much income early in retirement. This can lead to not having enough income, potentially running out of money, or incurring huge tax bills. All can have a huge impact on your standard of living, and all are avoidable.

Those who have access to a financial adviser will have valuable support navigating these processes in the run up to, and through, retirement. There’s also good news on the horizon for those without access to a financial adviser, with targeted support reforms coming in from April. These will enable providers to really step up the support they can offer to their customers by being able to offer options based on what might work for “people like them.”

**Read more: **You could be missing thousands in pension tax relief – here’s how to claim it

If you want to find out more about your potential retirement options, then see what your provider can offer you in terms of information, such as articles and webinars. There is also government support through the Pension Wise service, which offers free guidance. This can help you understand your options and work out what level of support you are likely to need.

Some key questions to consider can include:

1. What level of guaranteed income do I need?

The state pension will offer a level of guaranteed income which rises every year, as will a final salary pension if you have one. The other option is to buy an annuity with some, or all, of your pension. Annuity incomes have been riding high in recent years off the back of soaring gilt yields, so have proved popular. However, once bought, they can’t be unwound so you need to search the market to make sure you’ve got the right one for you.

2. What about flexibility?

For some people, the flexibility of income drawdown will be appealing. This enables you to remain invested in the market for longer and draw an income that meets your needs. However, you need to be comfortable with investment volatility and monitor how much you take, otherwise you risk running out of money.

It’s also worth saying you don’t have to settle for an either/or approach with annuities. You can combine both options to give you a level of guaranteed income as well as a degree of flexibility through drawdown. You can then annuitise in stages throughout retirement as your needs change.

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Less than half of people understand their retirement options, according to data from Hargreaves Lansdown. · Jacob Wackerhausen via Getty Images

3. What about my family?

Do you have a spouse or partner that you want to make provision for after you’ve gone, or do you want to leave something to your children? This will affect the options you choose. For instance, a single life annuity means your partner could be left with nothing if you die before them, while opting for drawdown gives you more flexibility when it comes to passing money down.

4. The impact of inflation over time

You could be retired for 20 years or more and so you need to consider the impact of inflation. If you opt for a level annuity, then the income will not increase, and you may find over time you start to struggle. You can get inflation-linked annuities, but the starting income is lower, and it can take years for it to catch up.

Income drawdown will give you the opportunity for investment growth, which can preserve your purchasing power, but you will need to be comfortable with investment risk. Again, a mix and match approach can be taken, and you can seek financial advice to put a strategy in place.

**Read more: **Why it might be OK to have a secret savings account

5. Tax issues

You can put yourself at risk of incurring large unnecessary tax bills as you enter retirement. For instance, if you make a large withdrawal from income drawdown, or cash in a pension, you might find yourself clobbered with a tax bill. In my column last week, I also wrote about the ongoing saga of people having to claim back tax refunds as they were overtaxed when they accessed their pension for the first time.

Read more:

**How to plan for retirement as the state pension age rises**

**This little-known perk can supercharge your pension savings**

**5 dos and don'ts on reinvesting pension cash into your SIPP**

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