On average, in retirement, most households spend around £2,110 per month. Many people overestimate how much they will need in retirement by assuming they will spend the same as they currently earn.
This is because they fail to appreciate the reduction in expenses that comes as you get older. The mortgage is often nearly paid, children have flown the nest and the significant expense of traveling to and from work and other ancillary expenses incurred whilst working are gone.
What a comfortable retirement looks like is different for everyone. However, many people retire when they reach age 65-66. The State Pension turns up at age 66 for people retiring now, although this age is increasing in future decades, giving a couple almost half the amount needed on average.
The remainder of the income then needs to come from either company-sponsored pensions or personal savings. This is where the planning comes in.
If you started saving at age 20 then the amount required to fund a comfortable retirement would be £213 per month. By aged 30 this figure would have increased to £276 per month. If you wait until you are 40 to begin saving, then you would need to contribute £384 per month. And, if you start 10 years later, at age 50, then the monthly figure needed would be £647 per month. And we are only talking about funding a modest retirement – many people want significantly more than this.
So, the first key point has to be – start saving early.
Turning to retirement itself, research shows that between ages 65 and 79 is the happiest period of our lives. Spending on holidays and nights out gives us a stock of happy memories to draw upon later in life. After that, the amount of money that people spend reduces significantly as they become more infirm.
If you can spend time visualising your retirement now, it will help answer the question of how much needs to be saved and for how long.
We have seen many people plan and achieve their ideal retirement in the 23 years since Foresight was established. A common factor is that those who took an early interest in their retirement and worked out what their retirement both looked and felt like proved to have a better chance of achieving their goals.
The famous author Terry Pratchett summed it up best, “If you do not know where you come from, then you don’t know where you are, and if you don’t know where you are, then you don’t know where you’re going. And if you don’t know where you’re going, you’re probably going wrong.”
If you would like to work out how to make your retirement a reality then speak with one of our Wealth Strategists, who can help you draw up a plan to make your retirement a reality.