How much do you need to save for retirement?

Retirement could change everything financially, and the amount of money you’ll need will depend on the lifestyle you’d like to have. So, whether that includes holidays, family time or hobbies, the sooner you start to put financial plans in place, the more chance you’ll have of achieving your goals. With the help of Mark Butterworth, our Head of Financial Advice Support we answer some of the questions we get asked about how much you might need to save for retirement.

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How to calculate the rough cost of your retirement, while looking at ways you could support your lifestyle.

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Is there an average amount needed for retirement?

Everyone’s different, so there is no magic number, but a 2020 study by Which?, has calculated the average pension amount that couples might need each year to cover their retirement needs. The study found:

  • Comfortable retirement = £25,000 a year to afford the essentials, plus European holidays, hobbies and eating our regularly.
  • Luxury retirement = £40,000 a year for essentials, hobbies and holidays to Europe, plus long-haul trips around the world and a new car every five years.

Which means the plans you make over the next few years could really make a difference.

Watch our video to hear Mark Butterworth, Head of Financial Advice Support discuss some of the things to consider as part of your retirement plans, and how our Financial Advice service could help you.

So, how much will I need to save?

The full new state pension will pay an income for as long as you live. In the current 2020/21 tax year this provides £9,109 per year (assuming you have paid 35 years worth of National Insurance contributions and are also eligible for the full amount). Although its a valuable source of income, its unlikely to support you in retirement on its own, which means you ll be reliant on your own savings, investments and pensions. Our financial advisers should be able to provide a good insight into how much additional funding will be required to give you the lifestyle you desire.

Mark Butterworth

If you think there might be a shortfall in your retirement savings, there might be plans you can put in place now to try and bridge the gap. And, even if you think you’ve saved enough, you might be able to make your existing savings more tax-efficient.

Mark Butterworth, Head of Financial Advice Support

Sign up to our Life and Money email alerts to get more information about saving for retirement, pension planning or general financial advice. Or get in touch if you’d like to talk to us about making a start on those plans now.

Important information

A pension is a long term investment and your capital is at risk. Your fund value will fluctuate and can go down, you could get back less than you paid in. Your eventual income will depend on the size of your fund at retirement, future interest rates and tax legislation.

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