Your retirement age explained

Have you ever thought about your ideal retirement age or how much you’ll need to have saved for a comfortable retirement? If you haven’t, you’re not alone. Many people put off planning for retirement, but it’s never too late to start. If you’re worried about not having enough saved for a comfortable income after you’ve given up work, don’t worry, read on to discover right questions to ask and start planning for a financially secure future. Build a picture of your ideal retirement age and begin setting realistic savings targets to achieve the post-work lifestyle you want.

Calculating your retirement age

To calculate a rough age of when you can retire, you first need to consider how much money you’ll need per year to maintain a lifestyle you’re comfortable with. One way to start this is by looking at guidelines from the *Pensions and Lifetime Savings Association (PLSA). They provide a general breakdown of how much income is needed for different lifestyle levels in retirement. 

* The Standards are the property of and are provided by the Licensor and Loughborough University.

Lifestyle levels explained

• Minimum lifestyle: This is when you have enough money to cover all of your basic needs with some left over to have fun with. You could have a staycation once a year and eat out once a month.
• Moderate lifestyle: This is when you have more financial security and flexibility. You’ll be able to travel abroad at least once a year to an all inclusive and eat out several times a month.
• Comfortable lifestyle: This means there is less financial stress and more spontaneity. You're likely to be able to travel both home and abroad more frequently. You can treat yourself to more activities, beauty treatments, and subscriptions.

For each lifestyle, the PLSA recommends these savings as the minimum amount needed to achieve the lifestyles.

While these figures act as a good starting point, they are only a guide, as every individual’s circumstances will be different. You may have heard about something called the 4% rule, which is a method some people use to estimate how much money they will need. The idea behind this is that you should aim for a retirement fund that can pay out 4% of its total value each year. For instance, if you’re single and aiming for a moderate retirement, you would need approximately £780,000 in your private pension fund (so not including any State Pension entitlements) to generate an annual income of £31,300, assuming you've already taken your tax-free cash. This estimation also assumes your pension has an average growth rate and inflation remains the same.

This example is not advice or a recommended course of action, but it helps illustrate the kind of pension pot size required to meet some lifestyle goals. Working with a financial adviser makes it easier to calculate how much you need to save and when you can realistically retire.

What about the state pension?

In addition to private savings, you’ll also be entitled to the state pension, which provides some income in retirement. However, it’s important to note that it may not be enough to cover all your expenses on its own.

Here are some key facts about the state pension:

• Men and women can claim the state pension starting at age 66.
• From May 6, 2026, the state pension age will increase to 67.
• As of now, the state pension pays £221.20 per week, which amounts to £11,502.40 per year.

While the state pension provides some financial support, it’s clear that this amount may fall short of covering the costs needed for a comfortable or even moderate retirement. Based on the earlier example , even the most basic lifestyle for a single person would require more than the state pension can provide, which is why retirement planning is crucial.

Additionally, research by M&G and the International Longevity Centre UK found that over 50% of people believe Government support for older generations will decrease in the future. Younger generations may not be able to rely as heavily on state support as current retirees. This further emphasises the need to start saving now to ensure you can maintain your desired lifestyle in retirement.

Tax rules can change and the impact of taxation, and any tax relief, depends on your personal circumstances and where you live.

Other retirement age considerations

Beyond calculating the amount you need to save, there are other factors that can influence your retirement age. One of the most important is how much you’re contributing to your pension over time. It’s never too late to boost your savings - whether through regular contributions, windfalls, or inheritance.

It’s also crucial to consider any debts you might still have. For many people, paying off their mortgage is a key milestone that signals the approach of retirement. Clearing debts can free up income for savings and help you retire earlier.

As you get closer to retirement, preserving your savings usually becomes just as important as growing them. Some people decide to take less risks with their investments the closer they get to retirement. If you receive an inheritance or a windfall, reinvesting that money into your pension could potentially provide significant tax benefits and bolster your retirement fund. As with any investment the value can go down as well as up so you might not get back the amount you put in. A financial adviser will find the best investments to help achieve your goals and work out the most tax-efficient way to take your money when the time comes.

Speak to a financial adviser to discover your retirement age

Planning for retirement can feel overwhelming, but you don’t have to do it alone. Whether you’re just starting to think about retirement or are well into your planning process, talking to a financial adviser can help you make informed decisions.

M&G offers personalised support. Our fully qualified financial advisers will work with you to create a tailored retirement plan. As discussed, calculating your retirement age involves many factors - your savings, lifestyle goals, debts, and even future inheritances. With expert advice, you can feel confident that you’re on track to meet your retirement goals.

If you’re ready to take the next step, book an appointment with a financial adviser. Financial advice can really make a difference. Join over 94,000 clients who trust us with their money.