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There’s a lot to consider when it comes to retirement planning. But whether or not you can afford to retire usually depends on two things: how much you need and how much you have.

How much might I need?

The reality is that you’ll probably need less in retirement than you did for much of your working life. Your children may no longer need financial support and you may have paid off your mortgage. If you’ve previously had an expensive commute to work, the move to more hybrid working patterns as a result of the pandemic may have given you an indication of how much less you’ll spend on transport once you’ve retired.

Of course, the amount you’ll need will also depend on the kind of lifestyle you want when you retire.

The Pensions and Lifetime Savings Association’s Retirement Living Standards are a good starting point. They’re designed to ‘help people picture the lifestyle they want when they retire, and understand the cost’. And they’re regularly reviewed to ‘ensure they keep up with changes in spending habits as well as to changes to prices on the shelves’. In fact, they’ve recently been updated to ‘reflect changing attitudes towards retirement lifestyles post COVID-19’. Source: Pensions and Lifetime Savings Association press release, 12 October 2021.

The Retirement Living Standards estimate that a single person would need £20,800 a year to enjoy a moderate lifestyle in retirement, with a couple needing £30,600. This covers basic needs, plus gives some extra for things like one European holiday a year.

If you’re looking for a more luxurious retirement that includes, for instance, more travel and a new car every five years, they estimate that a single person would need a yearly income of £33,600 and a couple £49,700.

Bear in mind though that as you go through retirement, your spending habits are likely to change and so your income requirements may fluctuate over the years. Typically, people spend more in their early retirement years, then less as they get older. But they might need to start spending more again if they need care or support.

How much do I have?

Once you have a realistic idea of how much you’ll need for the type of lifestyle you want, the next step is to work out if you have enough to fund this.

Many people put a lot of emphasis on pension savings as the way to fund retirement. Although these are likely to be a major part of your retirement income, it’s important not to overlook other savings, investments and sources of income.

In particular, if you have any stocks & shares ISAs, check how much they’re currently worth. Also include any income from final salary pensions or from rental income if you have let any properties. The State Pension should boost your income too once you’re eligible (currently age 66, although this is likely to rise in the future).

If you want to understand how all your pension savings, other savings and investments, and income come together to form the overall value of your total retirement savings, our retirement calculator can show you in five minutes. It takes account of all of your sources of retirement income, including the State Pension, and compares your total savings against the recently updated Retirement Living Standards so you can understand what sort of retirement lifestyle you may be able to afford.

See your retirement income in 5 minutes >

What if I don’t have enough?

If it appears that what you have won’t cover the lifestyle you want in retirement, there are other options to consider, depending on your circumstances.

  • Carry on working for a while or transition to part-time work – this will give your invested retirement savings, such as pension plans and stocks & shares ISAs, the potential to grow in value. Remember though that the value of all investments can go down as well as up, and you could get back less than you paid in. Carrying on working also means you can continue to pay into your pension plan, giving it additional potential to grow in value.
  • Re-think retirement plans or put off big one-off purchases – if you’re ready to leave working life behind or continuing to work just isn’t an option for you, this may be the route to go down.
  • Think about how you take your money – for example, you could use your cash savings first and leave your invested money, with the aim of growing its value over time and giving you more to live on in the future.
  • If you have a spouse or partner, plan together – this can bring a lot of benefits, even if you’re not retiring at the same time.
  • Get financial advice – if it still looks like what you have won’t cover the lifestyle you want in retirement, think about speaking to a professional, such as one of our financial advisers. There’s generally a cost for getting advice, but a professional can help you understand all your options – from when you can retire to your potential retirement income. Most importantly, they can give you peace of mind by helping you put a plan in place, and keeping it on track, so you can make the most of your retirement.

The information in this article should not be regarded as financial advice. Information is based on our understanding in October 2021. The value of all investments can go down as well as up, and you may get back less than you paid in.