How much do I need to retire?

How much do i need to retire on uk

We need liquid assets to buy food and pay our bills. An example of an illiquid asset is a house or flat. We cannot take a brick from our property and use it to pay for food at the supermarket! Retirement savings need to be liquid enough to make funding your bank account quick and straightforward when you need it.

Most of us fund a bank account on a regular basis to meet recurring expenditures. So, when you retire from paid work your salary stops. Then where does that regular money come from that you need to pay the bills and have a good life?

If you stop earning an income before your state pension entitlement which is currently age 66, then your regular expenditure needs to be met from your savings unless you are going to be financially dependant on someone else. If you have less than 10 years National Insurance credits, you will not be entitled to the state pension.

It is important to be able to work out how much your retirement lifestyle will cost you so you can assess how much annual income you will need to retire comfortably.

If you want to retire at 60 years old and you think you will probably live until you are 90, that’s 30 years’ worth of retirement lifestyle to fund from your net worth (assets minus liabilities).

The generally observed spending pattern in retirement is for it to be front-loaded meaning retirees spend more money in the early years of retirement and then less as their mobility becomes an issue. If the average annual expenditure you require is £20,000 in today’s money, then the total sum required would be £600,000 over 30 years.

This does not mean that £600,000 is required from day one because if you are entitled to the full state pension then this regular income of approximately £9,300 per year reduces the average annual requirement down to £11,700 when your state pension starts. Therefore, many people choose their state pension age as their eventual retirement date.

Others choose to carry on working for as long as they can because they need the involvement that their working life gives them as well as the paid income. Tax-advantaged pension contributions are available up to age 75 and National Insurance contributions are not deducted when you reach state pension age.

See also How to build a Lifetime Financial Plan.

To help you make the right decision for your final salary pension, we will take you through a clear, simple, transparent, and regulated four step process. 
If you would like to explore and discuss the options for your final salary pension transfer, - helping you make the right decision on your pension 
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