£260,000 - The amount you need to live comfortably when you retire
Ever wondered how much you might need to live comfortably in your retirement?
According to a posting that appeared on iNews on the 16th of May 2018, you will need to have saved a figure of £260,000 to fund expenditure during the whole of your retirement.
If you do not own your home, but need to pay rent throughout your retirement, the figure you need to live comfortably when you retire rises to a total of £445,000, suggests the article.
The figures produced in the iNews article are by no means the first or only estmates of what you might need to fund your retirement.
The immediate question, of course, is just what is meant by living comfortably. Comfort for one person might mean a life of poverty for another. A lot is likely to depend on what you are accustomed to and the life you expect when you retire.
For example, you are likely to have grown accustomed to the level of income you enjoyed before you retired. As the Consumers’ Association’s Which? magazine pointed out in an article in May 2018, maintaining that same liefstyle post-retirement is usually based on an income of between a half and two-thirds of what you used to earn.
Approaching the estimate of how much you need in a slightly different way, therefore, Which? conducted a survey showing that the average income for those who want to enjoy a comfortable retirement (based on their spending habits) is £26,000 a year, rising to £39,000 per annum if you want to live more luxuriously by including holidays and, say, a new car every five years or so.
When you retire
A further critical factor is the age at which you plan to retire – the earlier it is, of course, the longer you are going to need an income and the larger the size of your pension pot has to be.
For the majority of people, income upon retirement is going to depend on a number of sources, including:
- the value of the pension pot – based on an occupational or private pension scheme;
- income from any savings and investments; and
- the State Pension – the one fixed variable, since this is calculated according to the age at which you qualify, the number of contributions you have made during your working life, and the current rate at which the State Pension is paid.
Rather than considering any estimate of the average income you are likely to need or the size of the pension pot to fund it, therefore, you might instead perform a more personalised assessment using one of the several online pension calculators.
The charity Age UK, for example, suggests using a pension calculator devised by the government-backed Money Advice Service, which forecasts your likely retirement income and identifies any shortfall in the target you hope to achieve. The simple calculator asks you to input:
- your age – so that it may calculate when you qualify for your State Pension and the amount you receive;
- the age at which you plan to retire from work;
- the income which you hope to achieve once you retire; and
- the current value of your pension pots, any contributions you continue to make and any other sources of income.
Acting sooner than later
Whatever the income you hope to achieve once you reach retirement age, however, any of these estimates and calculations are likely to impress on you once again that it is never too soon to start thinking about retirement and making the best use of your pension pot.
That, of course, is precisely where we at Independent Pension Specialists Limited are poised to come in.
The information contained in this article is correct at the time of writing.