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Retirement lifestyle choices

2Jul18

Money might not be everything – but it certainly gives us the freedom to do what we do, when we want to do it. Our financial state of health opens up a wealth of lifestyle choices.

Retirement offers the freedom from formal 9 to 5 working hours and the chance to pick and choose the style of life you want to maintain – but do you also have the financial resources to support those choices?

The answer is likely to vary from one person to another, of course, since lifestyle choices are nothing if not personal and individual.

But how much money in retirement is enough? To help make the connection between finance and your lifestyle choices, it might be helpful to consider whether you want your income to cover the essentials only, support a comfortable way of life, or to fund something more luxurious:

Essentials

  • an article in Northern Ireland’s The Daily News on the 18th of June 2018, calculated that an annual income of £17,000 might cover such essential household expenditure as groceries (£3,870), the cost of housing (£2,879), insurance (£2,489), transport (£2,364) and clothing (£1,077);
  • the figures represent average spending across the whole of the UK since the costs vary, of course, from one region to another;
  • conventional wisdom puts it slightly differently by suggesting that the average person needs to aim for a pension income that is between a half and two-thirds of the income they enjoyed when in work;

Comfortable

  • research carried out by the Consumers’ Association’s Which? magazine at the beginning of 2018, on the other hand, calculated that the average family in the UK lived a more comfortable lifestyle throughout their retirement – needing an income of £2,200 a month, or £26,000 a year, to sustain it;
  • such a comfortable standard of living included expenditure on European holidays, hobbies and pastimes, and meals out;

Luxurious

  • if your lifestyle choices include the occasional luxuries, then Which? magazine suggests that an annual retirement income of £39,000 is needed;
  • such an income might cover expenses such as long-haul holiday destinations and a new car every five years.

Supporting your lifestyle choices

In an article on the 3rd of January 2018, the Telegraph newspaper pointed out that to sustain the lifestyle described as “comfortable” (namely £26,000 a year), you would presently need a defined contribution pension pot of £210,000, plus the maximum State Pension entitlement.

Since the current value of the average pension pot is only £50,000, however, the majority of people may be struggling to reach the minimum amount required for a comfortable retirement.

What to do about it

Whether you are aiming for a luxurious lifestyle in your retirement, want to be comfortably off or are prepared to live on just the basics, the sooner you get to grips with your pension arrangements and start your financial planning the better.

As the Association of British Insurers (ABI) suggests, the choices are rarely simple and straightforward, shrouded too often in an arcane language about pension matters. Therefore, the ABI supports the industry’s efforts to simplify and “humanise” the language used.

But they are issues which you do not need to face alone or without informed, independent and professional advice. That is our role here at Independent Pension Specialists.

Any data referred to in this article is correct as at the time of writing.

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