Have you been saving for retirement? Are you aware of the actual amount of money you need saved up to have a comfortable retirement?
You could be saving away contentedly into your pension pot without really knowing where you’re striving to go or what living standards you can afford to maintain in the future.
This is where the Retirement Living Standards come in. The Pensions and Lifetime Savings Association (PLSA) created these standards to assist Brits in visualising their potential future lifestyle.
The guidelines, which are broken down into three categories — minimum, moderate, and comfortable — serve as useful and meaningful bases for anyone who is unclear about how much they need to save for retirement.
What’s a comfortable retirement income?
According to the PLSA, a single individual needs:
- £12,800 annually to maintain a minimum standard of living
- £23,300 annually to have a moderate standard of living
- £37,300 annually to live a comfortable lifestyle
For couples, the numbers are £19,900, £34,000, and £54,500, respectively.
To give you an idea of what each living standard looks like, here are some scenarios you can visualise easily:
- The minimum living standard provides for the majority of a person’s basic necessities as well as some extra money for leisure, which includes going to social events. This standard allows for holidays within the UK, dining out once a month, and engaging in some reasonably priced leisure activities twice a week.
- The moderate lifestyle offers additional financial security and flexibility. It can afford you an annual holiday abroad, and you can dine out several times every month.
- A comfortable standard of living means you not only enjoy a very good level of financial security, but you could also indulge in some luxuries, like regular spa visits, theatre outings, and longer overseas leisure trips.
With the Retirement Living Standards, savers have a starting point they can understand so they can begin to set their own unique targets based on their current circumstances and future aspirations.
How much should you save?
The PLSA says that even if you’re eligible for the full £10,600-per-year State Pension, you’ll still need to accumulate a pension pot of at least £610,000 to have a comfortable retirement. That is, if you wish to convert your pension into an annuity. This way, you’ll have a guaranteed yearly income during your lifetime in retirement.
With this number as a basis, it may surprise you to know how much savings you’ll need to enjoy a comfortable retirement. Of course, your capability to achieve the recommended amount depends on your income, age, and current situation.
There are also tools and information you can use to see how you can best prepare for retirement financially. You might want to consider increasing your savings, investing, and reassessing your insurance coverage.
For advice on what your retirement will look like based on how much you’re saving, your financial adviser is your best resource. They can also assist you in finding investment opportunities to help increase your wealth and ensure a stable financial future.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.