Do you have enough money to retire?

When you picture retirement, what does life look like to you? Many people use this next chapter to focus on the things they love. This might include family and friends, hobbies or travel. We're all unique, so this will be different for everyone.

Reality though sometimes doesn't live up to expectations. It's important to have an idea about the amount of money you need in retirement to support your lifestyle and meet your needs. That way, you can make more informed decisions to better prepare.

How much money is likely to be enough?

Research carried out by The Wisdom Council in association with M&G*, January 2023, shows that, among people not yet retired, just over a quarter (26%) surveyed expect their income will be more, or roughly the same, in retirement. However, almost half (43%) believe their outgoings will be greater or about the same.

What this shows is a worrying gap between how much money people think they’ll have coming in and what money they’ll have going out.

The gap is further highlighted by the same research* into the experiences of those who are already fully retired. Just over half of those surveyed said their income is spent on day-to-day living expenses, with a small amount (17%) for luxuries and treats, and slightly less (13%) to cover emergency expenses – which could be anything from fixing the central heating to car repairs, or unexpected vet bills for a much loved pet. A similar amount (15%) is left for saving.

Retirement Living Standards

It doesn’t have to be that way. With a little preparation, there are ways to save for the kind of retirement you want, starting with being aware of how much you might need each year.

The Pensions and Lifetime Savings Association (PLSA) have developed guidelines to give an idea of how much life in retirement might cost. These are based on independent research by Loughborough University and are divided into three standards of living:

• Minimum level: £14,400 a year could cover all your basic needs, with a little left over for fun, based on not having a car, holidaying in the UK and spending £50 a week on groceries.
• Moderate: £31,300 a year could offer a more secure level of income, with a car replacement every 7 years and a three star European holiday – and enough left to hire decorators as opposed to DIY, for example.
• Comfortable: £43,100 a year will fund a car replacement every 5 years, a new kitchen and bathroom every 10-15 years, £100 a month on treating others to a meal out, and a four star holiday in Europe, with substantially more to spend on birthday presents than someone on the minimum income level.

These figures are correct as at April 2024 and are based on a single person living outside of London. They're for illustrative purposes only. You can see how much a couple might need on the PLSA website.

Prepare and save for the retirement you want

Understanding how much money might be needed is a great way to start, but the next step has to be to act on it. Leaving it all to chance in the hope that things will sort themselves out is unlikely to give anyone the best outcome.

• Paying into a pension can be a very tax-efficient way to save; however, the key is to save regularly and ideally start early – although it’s never too late.
• Money in retirement can come from savings, equity release, part-time work, the State Pension, workplace pensions, and maybe even an inheritance.
• Have realistic expectations. You might need to make compromises in retirement on what you spend on. Check the PLSA website for what a minimum, moderate or comfortable income looks like.
• A financial adviser can help you prepare for the retirement you want and help to create a plan and recommend ways to achieve your financial goals.
• Review your pension and other savings regularly to keep them on track. A financial adviser can help you look at ways to improve or make the most of them.

Thousands of clients have already taken that first step of booking a financial review, so if you're ready to take control of your finances – book an appointment here.

* Source: The Great Retirement report by The Wisdom Council, in association with M&G, Jan 2023