Case study 2 – Meet Richard

Richard is looking forward to his retirement, he celebrated his 66th birthday surrounded by his grandchildren and friends. He has a love of travel and is keen to see more of the world in his retirement.

Richard was fortunate enough to have saved £100,000 into his pension pot. He chose to take the 25% tax-free lump sum of £25,000 and used this to pay the remainder of his mortgage.

This leaves him with £75,000 remaining in his pension pot. He has set a target retirement income of £15,000. Richard believes that he can live fairly comfortably on this amount.

After going through his retirement options, with his target income he sees that if he opts for a regular monthly income from a drawdown plan his money would last for 13 years. Richard likes to stay fit at the gym and can’t wait to get working on his backswing at his local golf club. When not on the golf course Richard also likes to spoil his six grandkids.

Richard is aware that when he reaches 80, the extra income from his pension pot will have ran out. So he will have to rely on the State Pension in just over 13 years' time which will significantly alter his lifestyle*.

Let’s look at his yearly numbers

So his yearly budget looks a little like this:

Total outgoings

He still has the same outgoings as most people his age.

What this means…

This would leave Richard with around £1,529 each year after paying tax or about £127 per month for other essential items or a few nice-to-haves. Richard is able to use his extra pension income for a few luxuries, but he still has to budget carefully in order to be able to maintain the lifestyle he wants in retirement.