How much does your pension need to be to live a comfortable life in retirement? According to the latest figure from Quilter, to successfully live the lifestyle you want in retirement, you will need about £645,000. This is based on the most recent Pensions and Lifetime Savings Association’s (PSLA) retirement living standards for a single person, taking into account the recent increase in cost of living.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
According to their calculations, in addition to the £10,600 (as of 2023/24 tax year) from a state pension, approximately £26,700 (net of tax) per year is needed for a single person to live comfortably. These costs include estimates for travel abroad, food spending, birthday presents, and other essentials (or nice-to-haves) that one would normally encounter in a given year.
Of course, the estimate of £645,000 is simply that — an estimate. There will be people who choose to live a more extravagant lifestyle when they retire as that is what they were used to before retirement and that will obviously require a bigger pension pot and on the flip side, there will be people accustomed to a more modest lifestyle, it all depends on your individual circumstances.
In order to come up with this number, the calculations assume an escalating income of 3% and an annuity rate of 5.1%, based on someone who is 66 years of age, the current minimum age set to receive state pension and that retirees are living rent or mortgage-free. The PSLA’s research concluded that retirees attempting to achieve a basic standard of living will now have to contend with an increased expenditure of almost 20% this year alone, thanks to high inflation.
How to get your magic number
The best way to set yourself up for success is to start saving early. Pension pots benefit from compounding interest, which makes your money work harder for you and grows exponentially over time. Figuring out exactly how much you’ll need to save for retirement can be hard, but you don’t have to do it alone.
If you are having trouble prioritising contributions to your pension pot, don’t despair. The advisers at Dental & Medical Financial Services are experts, with years of experience helping their clients build wealth and plan their finances according to their life goals. For more information about how you can hit your retirement savings goals or if you have any questions about building your pension pot, get in contact with us today.