How much do you need to retire? The income you could expect to need for ‘comfortable’ retirement
Millions of employees are now automatically enrolled into a workplace pension thanks to auto-enrolment
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The cost of retirement will vary from person to person, with some retiring mortgage free while others may have rent or loans to factor into their budget.
While the exact answer of how much a person needs to retire will vary, there could be some guidelines which help.
The Pension and Lifetime Savings Association’s (PLSA) Retirement Living Standards, based on independent research by Loughborough University, have been developed to help people picture what kind of lifestyle they could afford in retirement.
They’ve been divided into three levels – minimum, moderate and comfortable.
The minimum covers “all needs with some left over for fun”, including enough to enjoy a week and long weekend in the UK every year
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The standards include a range of common goods and services, plus an estimated cost for each level.
Other costs such as a mortgage, rent, social care costs and any tax on pension income aren’t included, so it’s recommended a person seeks independent financial advice for their specific circumstances.
The amounts for different levels are the income level one needs, after paying tax on income.
The minimum covers “all needs with some left over for fun”, including enough to eat out about once a month and enjoy a week and long weekend in the UK every year.
For a single person, this is currently £12,800, or £14,300 if they live in London.
For couples, the amount is £19,900 and £22,400 in London.
The moderate level offers “more financial security and flexibility”.
With this income, retirees may be able to afford eat out several times a month, take one foreign holiday a year, and have a three-year-old car which is replaced every 10 years.
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Those on a “comfortable” income could afford three weeks holidaying in Europe each year
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It’s currently £23,300 for singles (£28,300 in London) and £34,000 for couples (£41,400 in London).
The comfortable retirement level offers “more financial freedom and some luxuries”.
It’s currently estimated to cost £37,300 for singles (£40,900 in London) or £54,500 for couples (£56,500 in London).
According to the Retirement Living Standards, those on a “comfortable” income could afford three weeks of holidaying in Europe each year and a two-year-old car replaced every five years.