Can you afford to retire?
Even if it seems a long way off, it's really worth thinking about what kind of lifestyle you'll want when you stop working - and what it might cost.
You may not need quite as much to live on when you retire. You might have paid off your mortgage by then, and some of your expenses might be lower. That said, you'll still want to do a lot of the things you enjoy doing right now. And little luxuries can all add up.
It's also useful to bear in mind that we're all living longer - so your retirement could well last more than 20 years.
Retirement tool - your life once you stop work
What kind of life would you like to lead when you've said goodbye to the 9-to-5? Create a vision of your ideal retirement and we'll give you an idea of how much money you'll need to fund it.
Experts say that you need around 2/3 of your income to live comfortably in retirement.
To fund the lifestyle you've just chosen, you'll need:
Where does that £10,700 figure come from?
The Joseph Rowntree Foundation (JRF), a respected charity, recently asked members of the public what counts as a minimum acceptable standard of living — one that includes more than just essentials such as food and somewhere to live.
Based on these answers, JRF worked out what income people need to achieve this — which was around £10,700 a year for a single retired person.
What the £10,700 includes
This assumes that, come retirement, people should still be able to buy birthday presents, have a week's holiday in the UK, buy alcohol and visit the cinema. They should also have some of the things we take for granted now, that we didn't used to: mobile phones, DVD players and internet access, for instance. It also assumes that they'll have paid off their mortgage.
What it doesn't include...
There were some things that weren't seen as necessary for an acceptable lifestyle once you retire. The £10,700 assumes public transport, not a car and it assumes no dishwasher, no cigarettes, no paid-for TV — and spending less than £20 a month at a restaurant.
How to use these figures
The figure of around £10,700 is for a single person — a retired couple need about £15,700 a year between them (as it's cheaper for two people to live as a couple).
And these figures are only a guide. Everyone's idea of what constitutes an acceptable standard of living is different — if you live in a remote village, for instance, there may be limited access to public transport and a car may, instead, be seen as essential.
You can read more about the research at the Joseph Rowntree Foundation.
How we work out the figures
The final figure we show is higher than the sum of the options you've selected. This is because it's based on the amount you would need to earn, before tax is deducted, to pay for the items you've chosen. We’ve based our calculations on a single person currently aged 64, retiring after April 2021, paying 20% tax, with a personal allowance of £12,570. The tool does not take into account Personal savings allowance, Dividend tax allowance or Lifetime Allowance. The figures will change if your personal circumstances are different (i.e. do not match).
2-week holiday each year
The £10,700 figure for basics assumes a one-week UK holiday. If you want European sun, we've assumed you'll spend approximately £2,300 on an all-inclusive holiday for one, with £500 spending money.
4 weeks in the sun each winter
You can beat the winter blues without spending a fortune. Around £5,500 is for a four-week stay (self-catering) in a Florida apartment for one person, including flights and £400 spending money a week.
A car + 5-yearly upgrade
A car that costs £15,000 new will set you back roughly £2,970 in running costs each year. And if you want to replace it every five years, you'll have to save a further £3,000 a year towards it.
Health club membership
If you like to stay in shape, you'll have more time for exercise. Whether you like to raise your heart rate on the treadmill, pump iron or practise pilates, joining a health club will cost you around £650 a year.
A concert, play or show once a month
The £1,200 figure covers a ticket for one, a train fare and a meal 12 times a year.
Weekly dinner or drinks with friends
If you like to go out now, that's not likely to change when you stop work. We've assumed £40 every other week for dinner out, and £30 every other week for drinks out – total £1,800 a year.
Shopping trips for you + your family
We've put down an annual figure of £1,500 – whether you spend it on the latest gadgets or the latest fashions is up to you.
We've allowed an annual spend of £3,000.
This example is not designed to be specific to your personal circumstances. Its purpose is to act as a guide to help you understand the income you might need to fund the lifestyle you want. Figures are based on today's costs for such a lifestyle and do not take into account inflation.
So, what next?
Use the retirement planner to see what your pension could be worth and the difference that making small changes to your payments could make.Find out what your pension could be worth
Your income in retirement
“How much could your pension give you when you retire?”