How much money do I need to retire?

This is a question we are asked all the time. In truth it is a difficult one to answer, simply because everyone is different and has different wants, needs or expectations for their retirement.

Typically, it is something we think about as we get older and progress in our career, meaning we have funds to put away and retirement is on the horizon and is a realistic choice. More and more frequently however, we are also hearing it from younger people, at the start of their careers, who are taking control of their finances early.

Whatever age you are, it is never too early to plan for your future. The sooner you start, the sooner (potentially) you can achieve your retirement goals. It’s hard to know exactly how much anyone needs in later life because everyone has different circumstances and different expectations, but by starting to plan how much you’ll need, and working out how best to build up your pension pot with the necessary funds, the better position you will be in to live your best life in retirement.

What lifestyle do you want in retirement?

Regardless of someone’s age or career circumstances, the best way to answer the question of how much money they need when they retire is to focus on the goals they have in mind, for example, when they want to retire and what they want their life in retirement to look like.

Ask yourself, where do you want to live, how many and what type of holidays do you want a year, do you have any hobbies or interests you want to pursue as you get older?

People have different ideas of how they might like to live when they’ve finished working, so to help savers think in more practical terms about the kind of lifestyle they might lead in retirement, the Pensions and Lifetime Savings Association (PLSA) has created the Retirement Living Standards, which has three broad categories. They are as follows:

  1. Minimum – geared towards paying for essentials with all your needs covered.
  2. Moderate – gives financial security and some flexibility.
  3. Comfortable – provides more financial freedom and some luxuries.

Retirement Funds
To achieve the minimum living standard, the PLSA research suggests that a single person will need funds of around £14,400 a year, this increases to around £31,300 a year to enjoy a moderate standard of living and £43,100 a year if a person wants to achieve a comfortable standard of living. For couples these figures rise to around £22,400, £43,100 and £59,000 respectively. [1]

To put these standards into perspective, according to the PLSA, the minimum living standard covers most people’s basic needs, plus enough for some fun and leisure time, including some social occasions. For example, this includes an annual UK holiday, eating out once a month and some affordable leisure activities about twice a week.

In addition to the minimum lifestyle, the moderate lifestyle provides more financial security and more flexibility. For example, you could have a two-week holiday in Europe and eat out a few times a month.

At the comfortable level, retirees could enjoy some luxuries like regular beauty treatments, theatre trips and up to three weeks holiday in Europe each year.

How much will you spend in retirement?

When it comes to working out the retirement income you’ll need, a common mistake is to base this figure on your regular income and expenditure while working. Calculating it this way might mean you think you need more to live on than you actually do.

As we get older our living costs will probably change – often significantly. People tend to spend less on fixed housing costs as their monthly mortgage fees go down or as terms end,  but might spend more on lighting, heating, healthcare and insurance. Many people’s spending also goes down after they stop working because they no longer have to worry about things like commuting and pension contributions.

Again the PLSA research has suggested some indicative costs, for example that retired couples living outside London in 2021 spent on average around £30,600 a year (excluding housing costs). That’s £1,500 more than before the start of the coronavirus pandemic.

How much should you save into your pension?
For most people, their pension income will come from three sources:

  • State Pension
  • Private and/or workplace pension
  • Any other income, from property or investments, for example


The full state pension for 2023-24 is £10,600 per year. That goes a long way to reaching the annual funds required to meet the minimum Retirement Living Standard. Assuming you qualify for the full State Pension, the PLSA suggests you’ll still need to build up a pension pot worth at least £490,000 to achieve a comfortable retirement. This is if you want to turn your pension into an annuity, which pays you a guaranteed annual income for life in retirement.

Given that Retirement income market data suggests that the average amount sitting in pension pots after a lifetime of saving is £61,897[2] many retirees may be a little concerned about the perceived shortfall in income their savings will provide.

The positive news is that through a combination of the full State Pension and auto-enrolment in a workplace pension, the minimum living standard should be achievable for most people, but current minimum contribution levels may not be enough to get average savers up to the next level from the minimum to a moderate lifestyle.

That’s why it’s vital that they are provided with the education, tools and advice to make better and more proactive investment decisions during their working lives. A financial adviser will give you an idea of what your retirement income will be, based on how much you’re saving.

[1] retirementlivingstandards.org.uk, Feb 2024

[2] Retirement income market data, FCA, Oct 2022

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.