How much do I need to retire comfortably?
Thinking about retirement can put your head in a spin. There’s certainly lots to consider, such as what lifestyle you want to live, what age you’ll be when you retire, and perhaps most importantly, how much money you need.
But this shouldn’t put you off. Planning for your retirement is important, and the sooner, the better. Saving and investing sufficiently for your retirement can be one of the best decisions you can make.
A great place to start is with research. You can access plenty of resources online, such as blog posts and videos at https://www.saltus.co.uk/. Plus, in this article, we’ll explore some research conducted by Loughborough University and the Pensions and Lifetime Savings Association (PLSA) to help you on your way.
Next, you should think about how much you really need for a ‘comfortable’ retirement, so that you can start planning your finances for tomorrow, today!
Research from Loughborough University and PLSA
Back in 2019, Loughborough University and the PLSA carried out extensive research, based on how much money a person, or couple needs per year in order to enjoy retirement. They concluded there were three types of quality of life once you retire — minimum, moderate or comfortable.
This took into account a full state pension, as well as other savings and private pensions on top of the fixed government allowance.
Although there were some variations depending on location, the report discovered that a single person in retirement would need approximately:
- £10,200 a year to achieve the minimum living standard
- £20,200 a year for moderate
- £33,000 a year for comfortable
And for a couple, the following applies:
- £15,700 a year for minimum
- £29,100 a year for moderate
- £47,500 a year for comfortable
Breaking this down further, the report explained that for a comfortable retirement, £33,000 would allow for £56 a week for food shopping and around £1,000 a year for clothing.
It describes:
“At the comfortable level… retirees could enjoy some luxuries like regular beauty treatments, theatre trips and three weeks in Europe a year.”
This is all well and good, until you compare it to the lifestyle you want to live in retirement, and the income you are used to in the present. There could be some stark differences between the report’s idea of a comfortable retirement, and your own.
The reality of retirement in the UK
The figures from this report can be used as a guide, but in reality, the present landscape doesn’t bode well.
Did you know that a staggering 21% of over 50s in the UK do not have any pension savings? And of those that do, 79% have an average pension savings of £146,000. If you assume a growth rate of 4%, this only provides an income of just £5,800 a year.
If you also consider the fact that 33% of adults have a chance of living past 90 years old, we can see the importance of saving and investing for your retirement.
Your idea of a comfortable retirement
Although it may be a good starting point, the research from Loughborough University and the PLSA provides too generic an answer. Your retirement plan is highly personal, and therefore your pension pot will reflect that.
If you are a high earner, with a six-figure salary in your working life, then an income of £80,000 to £100,000 a year in retirement could be more realistic. This might include four weeks of holiday a year or venturing further than Europe.
You should therefore take the time to contemplate what ‘comfortable’ means to you. Speaking to a financial adviser can help you to evaluate what you spend now, and how this will change — or remain the same — when you reach retirement.
Avoid the most common retirement mistake
Taking all the figures from the report into account, and the reality of what retirement can look like for someone living in the UK, it’s clear that failing to save and invest in your pension pot is one of the most significant errors you can make.
However, with some expert financial planning and advice from the professionals, you can achieve the retirement you desire.
Disclaimer: Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested.
