Big purchases: before or after you go part-time?

Talk to anyone a year or two from working less and a list tends to appear. Sometimes it is written down. More often it lives in the back of the mind: the car that is getting tired, the kitchen that has seen better days, the trip that keeps being postponed. Before the pay cheque shrinks, the thinking goes, perhaps now is the moment.

Sometimes it is. Sometimes it is not. This piece will not tell you which, because that depends entirely on your own numbers. What it can do is lay out the considerations, so the decision feels like a choice rather than a rush.

The usual pre-retirement list

The items vary, but certain themes come up again and again:

• A car. Replacing an ageing one before income falls, or changing to something that suits a different pattern of life.
• The house. A new boiler, roof repairs, a kitchen or bathroom, windows, insulation or other energy-efficiency work that could lower running costs later.
• A big trip. The long-haul journey, the extended stay, the thing you always said you would do “one day”.
• Helping children. A contribution towards a deposit, a wedding, university costs or simply a cushion.
• Kit for what comes next. A bike, tools, a camera, a garden room: equipment for the hobbies you plan to have more time for.
• Everyday comfort. A new sofa, a decent bed, a mattress you have been putting up with for too long.

None of these is right or wrong. The question is whether the timing makes a difference to you.

Why timing can matter

When you apply for credit of almost any kind, lenders look at your income and whether repayments look affordable. That is normal, and each lender sets its own criteria. Lenders also usually ask whether you expect your income to change, and any planned drop in hours needs to be disclosed honestly. It does mean that an application made while you are on full pay may be looked at differently from one made after your hours, and your salary, have reduced.

For that reason, some people prefer to arrange anything that needs borrowing before they dial down. Others would rather not take on borrowing at all at this stage of life. Both positions are reasonable. The point is simply to know that the change in income can change what is available, and to factor that in rather than discover it later.

The mortgage is the big one here, and whether to pay it off, keep it or remortgage is a separate topic with its own trade-offs. If it is on your mind, MoneyHelper has free, impartial guidance on mortgages and later life, and it is worth checking your own circumstances before making any change.

Cash, or keep the cushion?

If you have savings, paying cash can feel tidy. No interest, no repayments, no application. But cash spent on a kitchen is cash no longer sitting in reserve, and that reserve can do important work while you are earning less.

Many people who dial down plan to use savings to top up a lower income for a while, often until a pension or the State Pension starts. We wrote about that stretch in the bridge years. A large purchase made from the same pot shortens the bridge. That might be fine. It might not. It helps to see it plainly before deciding.

Our part-time pay calculator shows roughly what your take-home pay would be at a smaller share of your hours. On a £45,000 salary in England with a 5% pension contribution, moving to 80% of your hours costs about £510 a month in take-home pay. Knowing your own figure makes it easier to judge how much cushion you would want to keep.

Watch for new monthly commitments

A one-off cost hurts once. A monthly one keeps going. Car finance, a furniture payment plan, a new phone contract, a gym, a streaming bundle or two: each looks small on its own, but together they can quietly take up a noticeable slice of a reduced income.

Taking on new regular payments just before your pay drops means carrying them on a smaller budget, possibly for years. That does not make them wrong. It does make them worth looking at twice. Our retirement budget calculator can help you see your regular outgoings in one place, so you know what a new commitment would sit alongside.

Replacing versus upgrading

There is a useful distinction between things you are likely to need to replace anyway and things you would like to have. A boiler that is near the end of its life, a car with rising repair bills or a roof with known problems will probably need attention in the next five to ten years whatever you decide about work. Dealing with them on full pay is one way some people reduce the chance of a large surprise later.

Upgrades are different. A bigger car, a smarter kitchen, the newest version of something that already works: these are choices, and perfectly valid ones, but they are not urgent. It can help to be honest with yourself about which column each item belongs in, and whether any of it is about how things look rather than how they work.

Permission to spend

Now the other side. Plenty of careful savers find spending surprisingly hard, even when the money is there and the purpose is good. The trip never gets booked. The worn-out bed gets one more year. If that sounds familiar, our piece on moving from saver to spender looks at why.

Dialling down is meant to give you more life, not just less work. Some purchases, especially experiences while you are fit and well, may be exactly what the extra time is for. The aim is balance: not spending in a panic before income drops, and not refusing to spend out of habit either.

A simple checklist

For each item on your list, these four questions can help sort it out. There are no right answers, only clearer ones.

An item that scores “yes, yes, no, no” might be one to consider sooner. One that scores “no, no, yes, yes” might comfortably wait. Most will land somewhere in between, and that is where your own priorities come in.

Bringing it together

The months before you dial down are a natural moment to take stock. Write the list. Put rough prices against each item. Then look at them next to your expected income and savings, rather than in isolation. Many of us find that a few things clearly belong in the “before” pile, a few can wait, and some quietly drop off altogether.

These are general considerations, and everyone’s situation is different. If you would like free, impartial help thinking it through, MoneyHelper is a good place to start.

Questions people ask