How much will I need to live on in retirement?

Planning for your life after work to ensure a financially secure future

Retirement planning is an important step to ensure a financially secure future. When calculating how much you’ll need to live on in retirement, there are various factors to consider. Everyone’s circumstances are different.

While the general rule of thumb suggests aiming for around two-thirds of your final salary at retirement after taxes, it’s crucial to consider your requirements and desired lifestyle. Some individuals may need more or less depending on housing costs, healthcare expenses, travel plans and other lifestyle choices. 

It’s essential to assess your situation and obtain professional financial advice to determine the appropriate amount to fund your desired retirement lifestyle.

Here are five key questions to ask yourself when planning for your retirement

1. What does my ideal retirement look like? 

Consider what you want to do in retirement and how you envision spending your time. Whether travelling, pursuing hobbies or spending time with loved ones, understanding your retirement goals will help you plan accordingly.

2. How much will it cost? 

Evaluate your expected expenses in retirement by categorising them into essentials and non-essentials. Essentials include housing costs, utility bills, insurance and everyday living expenses. Non-essentials may include leisure activities, travel and entertainment.

3. What size pension do I need? 

Once you estimate your required retirement income, you must determine how much savings you’ll need to generate that income. This calculation considers life expectancy, investment growth, tax implications and inflation. Obtaining professional financial advice will assist you in determining the appropriate pension size for your retirement goals.

4. Are my existing savings enough? 

Assess your current savings and investments to determine whether they are sufficient to meet your retirement goals. If there is a shortfall, consider strategies to boost your pension savings, such as increasing contributions or extending your working years. Additionally, evaluate other potential sources of retirement income, such as Individual Savings Accounts (ISAs) or the State Pension.

5. Am I entitled to state benefits?

If you have made 35 years of National Insurance (NI) contributions through work or by claiming certain benefits, you are entitled to claim a State Pension from age 66. The full new State Pension is now £203.85 a week (tax year 2023/24). And if you reached the State Pension age before April 2016 and are on the older basic State Pension, you will now receive £156.20 (tax year 2023/24). However, it’s important to note that this amount may not be sufficient to fund a comfortable retirement and may fall below the essential income level for many individuals.

Want to plan your retirement income step by step?

Retirement planning can be complex. By taking proactive steps and making informed decisions, you can work towards a financially secure and fulfilling retirement. Please get in touch with us to find out how we can help you put in place the right retirement plans for your future.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE). 

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. 

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

YOUR OWN PERSONAL CIRCUMSTANCES, INCLUDING WHERE YOU LIVE IN THE UK, WILL HAVE AN IMPACT ON THE TAX YOU PAY. LAWS AND TAX RULES MAY CHANGE IN THE FUTURE.