The question I receive more than any other since the launch of Retirefulfilled is “How much would I need for a comfortable retirement in the UK”? It is a fair question and something that often seems to be mind boggling. I have decided to write this post which distils the process into easy and manageable steps.
This is important because retirement involves more than saving up a bucket load of money. It is how you will sustain yourself (financially and health-wise).
In this article, we are going to find out what exactly it takes to retire comfortably, how much you need to save for three types of lifestyles in retirement and begin the road paving your path toward that future today.
What Does a Comfortable Retirement Look Like to You?
You need to know what you consider comfortable before we get into the numbers. Is it the ability to travel the world? Family outings and hanging out with friends? New hobby or just spending your days without financial stress.
Whatever you want to do, the first step is having an idea of what your retirement will look like to figure out how much money you need saved. Of course, everyone will have different retirement goals and savings should be aligned with that.
How Much Will You Need Based on Your Lifestyle in the UK?
The Pensions and Lifetime Savings Association (PLSA) has developed three retirement lifestyle categories — Minimum, Moderate and Comfortable to help you work out how much money you might need in your later years. We breakdown these income levels and what they could mean for you below.
Minimum Retirement Income
This level touches on your physiological necessities such as shelter, food and transportation including occasional dining out. This would be sufficient if you are looking for a more minimalist lifestyle.
- For individuals: £12,800 per annum
- Couple: £19,900 per year
Minimum retirement income is the amount left in the income pot to ensure a basic standard of living which at best provides you with your needs but little else beyond that.
Moderate Retirement Income
Living moderately allows for more freedom. This is enough to cater for the essentials and a little bit of luxury like an annual holiday, dining at restaurants regularly, being able to socialise.
- Single person: £23,300 per year
- Couple: £34,000 per year
A great level for those wishing to blend cost with comfort, and those only getting the basics and allocating for just a bit of enjoyment.
Comfortable Retirement Income
A comfortable income is of value if you are aiming for a retirement where you don’t have to worry too much about money. This results in a more secure life and plenty of luxuries, like extra holidays each year, a bigger or better located house or car and all the expensive hobbies you desire.
- Single: £37,300 per year
- Couple: £54,500 per year
In other words, a comfortable retirement provides the economic freedom to live life as you want without worrying where your next income comes from and more ability to do things with your time that bring you joy.
How Much Do I Need to Save for a Moderate Lifestyle?
The next question most people ask is “How much do I need to save that would give me the kind of income to live these different lifestyles”? Many experts suggest that you should aim for a retirement income pot (accumulated total savings and investments including personal and workplace pensions and other financial assets) of about 20-25 times your desired annual income.
Here is how that works out for each of the lifestyles:
Minimum Lifestyle
- Single person: You are likely to need around £256,000–£320,000 in your pension pot to achieve a minimum income of £12,800 a year.
- Couple: £398,000 to £497,500 for a married couple requiring funding of £19,900 per year
Moderate Lifestyle
- Single person: This would provide an index-linked annual income of £23,300 based on an inflation rate of 2.7% a year, you need a pension pot of between £466,000 and £582,500.
- Couple: You will need around £680,000 to £850,000 saved to sustain a modest lifestyle with an income of £34,000.
Comfortable Lifestyle
- Single person: A single person should target to save between £746,000 to £932,500 to have a comfortable income of £37,300 per year.
- Married Couple: A couple wishing to live on £54,500 per year they will require a savings range of between £1.09 million and up to £1.36 million
These are obviously very rough numbers. The amount will vary depending on your retirement age, health and other income sources e.g. property or investments.
The State Pension is Easily Overlooked – Don’t Forget It!
It is also important not to forget the State Pension, which can provide a substantial boost to your retirement income. The full State Pension in the UK as of 2024 is £10,600 a year if you have made at least 35 years of National Insurance contributions.
To put that into specific terms, if your goal is to retire on a £23,300 a year income level in retirement, then the State Pension might pay for almost half of this amount leaving you to fund the balance yourself out of savings or pension contributions.
Planning for Holistic Retirement
Saving for your retirement is not only about accumulating the wealth you need to retire. It is a complete retirement because it goes beyond the numbers. The following is a partial list of the important areas where your retirement planning effort should be focused, in order to have a successful and satisfying plan for retirement.
1. Wellness: Physical health is the most critical part of retirement. Remember to plan in some health-related costs, whether that be NHS services and/or private treatments.
2. Leisure: Interests and activities; if you have something to look forward to, this can be the source of much satisfaction in retirement. Gardening makes the list of two of your passions … one for travel, and another to mentor in retirement.
3. Staying Connected: Survey has found that staying connected helps you stay sane. Fitting in time and finances for these relationships must be part of your retirement plan.
4. Financial Security: Planning for the unexpected such as repairs. You can sleep soundly during your retirement because you will have covered all of the above and still have funds within your pension account.
Building Your Retirement Income: You Can Do It!
I realize that some of these numbers may be intimidating to you, but in so many words, you do not have to eat an elephant all at once. Your retirement saving plan is a voyage, and it is never late to start this former roadmap.
There are plenty of ways to catch up if you already feel behind.
Start saving now: The sooner you start, the longer your money can spend growing through compound interest.
Employer contributions: if you can ‘benefit from employer contributions’ via your workplace pension, then ensure you opt in – this is, in fact, deemed as ‘free’ money.
• Boost your income through extra cash: Work part-time to quickly help you build that retirement pot.
• Look over your budget: Small changes you can make to how you spend money now will add up to big savings in the long run.
Learn more about how you can build a strong base and earn this peace in retirement, including if perhaps you did not save much money, we provide even deeper coverage on the subject with our article on Financial Wellness in Retirement: Building Security and Peace of Mind.
Next Steps – Achieving Your Retirement Dream
One of the things I have learned since starting Retirefulfilled is, I have come to realise that each retirement path is unique and with careful planning; a future that is financially sound and emotionally rewarding awaits.
So, what’s next for you?
Determine the level of comfort you require in retirement.
Consider your lifestyle, things you love doing and which give you happiness. With that vision in mind, you can then take steps towards it.
Not sure where to get started, how about by setting a savings goal for 1 year? Or, if you prefer a little bit of tailored advice … speak to a financial adviser!
Retirement is your opportunity to enjoy living. You been working so hard after all — with a bit of preparation, you will have such good time.
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