How much money do I need to retire?

What Kind of Retirement Do You Want?

The real question should be what kind of retirement do you really want? The Pensions and Lifetime Savings Association (PLSA) breaks retirement into three living standards, which is a handy way to think about what you actually want from your retirement:

● Minimum lifestyle: Covers your essentials such as housing, food, bills, and a small budget for leisure. Think of it as the basics without too many extras.

● Moderate lifestyle: A bit more freedom, maybe a European holiday once in a while, meals out, or a small car.

● Comfortable lifestyle: Full flexibility to enjoy life such as holidays, theatre trips, hobbies, and a little indulgence.

Knowing what lifestyle you want makes it easier to work backwards and figure out how much money you’ll actually need.

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How Much Will It Cost?

The latest figures from PLSA provide a snapshot of what a “comfortable” retirement could cost:

● Single person: £43,900 per year
● Couple: £60,600 per year

For moderate living, it’s £31,700 (single) and £43,900 (couple). Minimum living comes in at £13,400 and £21,600, respectively. Keep in mind, these are estimates. Your personal plans, lifestyle, and location could change the picture.

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Don’t Forget Your State Pension and Other Income

Your State Pension is a helpful foundation. For 2025/26, the full State Pension is £11,973 a year. Beyond that, think about:

● Workplace or private pensions
● Investment income
● Savings you’ve earmarked for retirement

It’s worth checking your State Pension forecast on the GOV.UK website, knowing exactly what’s coming in makes planning much easier.

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Working Out Your Pension Pot

Once you know your lifestyle and expected income, you can estimate your total pension pot. Tools like online pension calculators such as the one by Money Helper take into account:

● The age you would like to retire
● How long your retirement might last
● Inflation and cost-of-living changes
● Investment growth

For example, if you’re aiming for a comfortable retirement as a single person, you might need a pot of £540,000–£800,000, especially if you’re planning to convert it into an annuity for guaranteed income.

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Things That Can Change the Numbers

Several factors can shift what you actually need:

● Housing: Mortgage-free homes reduce costs, but rent or upkeep adds up.
● Lifestyle: Hobbies, travel, eating out, these need to be added to your budget.
● Care costs: Health or assisted living may come into play later in life.
● Longevity: Retirement could last 20+ years, so your savings need to last.

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Start Planning Sooner, Not Later

It’s never too early or too late to take control. Even small contributions now can grow significantly over time. Consider:

● Extra contributions to your workplace pension (don’t miss out on employer matches)
● Saving or investing outside pensions to give more flexibility

Thinking about the retirement you actually want, visiting far-off friends, taking that dream holiday can be a surprisingly powerful motivator to save a little more while you still can.

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Reality Check

Many people underestimate what they’ll need. A modest pension might cover a minimum lifestyle, but moderate or comfortable living usually requires planning. That’s where a financial planner comes in, they can help you:

● Understand what your retirement income might look like
● Calculate a realistic pension pot
● Make tax-efficient decisions about accessing your pension