How much income will I need in retirement?
20 July 2021
Question by Rory
Hi Holly, thanks for the guide on how to save for retirement. A key question for me and my fifties friends is, how much retirement income do we need (aka when can we afford to retire?) We’ve found the PLSA-suggested ‘retirement living standards’. What do you think of them?
Answered by Boring Money
“How much will I need to retire” is a question asked of us frequently but understanding how much you need to save to retire is difficult to define as not everyone is the same. It is often only when you are nearing retirement that you would really understand what your income needs will be and often that may be too late to plan. For an investor in their thirties, understanding what income needs will be at age 68 is almost impossible to imagine.
Fortunately, over the years, experts have devised useful rules of thumbs to follow to help us on our way to successful retirement planning. Most experts suggest that you will need 70-80% of your pre-retirement income after you retire. It is assumed that mortgages, debts and dependents are a thing of the past, leaving you with lower expenses.
I think the PLSA Retirement Living Standards do really well to capture what different incomes in retirement would cover, all the way down to what holidays or gifts for members of the family might look like. I particularly liked the examples given that highlight costs you might not have thought of – help with maintenance around the house, for example.
Of course everyone if different, but this is a nice way to get you thinking about what could be important to you, and put some “meat on the bones” of your plan.