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How much do
you need for the retirement lifestyle you want?
Here’s a question many people can’t answer: how much does the retirement you actually want cost?
It sounds simple, but most people are planning for a feeling rather than an actual lifestyle. Slow mornings and a UK holiday, or long-haul trips and treating the grandchildren? The gap between the two is bigger than you might think, and it’s worth knowing which one you’re actually planning for.
Here’s what the numbers look like.
Important reminder: This article is for information only and does not constitute personal financial advice. The value of investments can go down as well as up. Your actual retirement position will depend on your personal circumstances.
What does retirement actually cost?
Researchers have spent years looking at how people actually live in retirement. What they eat, where they travel, how much they spend on the car, the grandkids, the garden. The result is a set of annual spending figures for three different kinds of retirement life.
Here’s what those three lives look like in practice:
| One person household | £13,900 a year |
|---|---|
| What standard of living could you have? | Covers all your needs, with some left over for fun |
| House | DIY £200 a year to maintain condition of your property |
| Food | Around £57 a week on groceries, £30 a month on food out of the home, £12 per month on takeaways |
| Transport | No car, free bus pass, £32 per month for two taxi trips, £193 per year to cover 3 rail journeys |
| Holidays and leisure | A week long UK holiday. TV license and broadband plus a streaming service with ads. £21 per week for activities |
| Clothing and personal | Up to £460 for clothing and footwear |
| Helping others | £20 for each birthday and Xmas present. |
*The figures shown are the amounts of annual expenditure required to achieve the living standard (ie they are not gross income figures).
| One person household | £32,700 a year |
|---|---|
| What standard of living could you have? | More financial security and flexibility |
| House | £500 a year to maintain condition of your property, £300 contingency. |
| Food | Around £59 a week on groceries, £33 a week on food out of the home, £11 a week on takeaways, £110 a month to take others out for a monthly meal. |
| Transport | 3-year-old small car, replaced every 7 years, £23 a month on taxis, £112 per year on rail fares. |
| Holidays and leisure | A fortnight 3★ all-inclusive holiday in the Med (£1,600) and a long weekend off-peak break in the UK with £336 spending money. TV license and broadband plus two streaming services. £45 per week for activities. |
| Clothing and personal | Up to £1,500 for clothing and footwear. |
| Helping others | £30 for each birthday and Xmas present, £200 a year charity donation, £1,000 for supporting family members e.g. paying for grandchildren activities. |
*The figures shown are the amounts of annual expenditure required to achieve the living standard (ie they are not gross income figures).
| One person household | £45,400 a year |
|---|---|
| What standard of living could you have? | More financial freedom and some luxuries |
| House | £600 a year to maintain condition of your property, £300 contingency. |
| Food | Around £78 a week on food, £44 a week on food out of the home, £22 a week on takeaways, £110 a month to take others out for a monthly meal. |
| Transport | 3-year-old small car, replaced every 5 years, £23 a month on taxis, £223 per year on rail fares. |
| Holidays and leisure | A fortnight 4★ half board holiday in the Med (£2,345) with around £115 per day spending money and 3 long weekend breaks in the UK with £448 spending money per break. Extensive bundled broadband, streaming and TV entertainment subscription. £56 a week for activities. |
| Clothing and personal | Up to £1,500 for clothing and footwear. |
| Helping others | £50 for each birthday and Xmas present, £300 per year charity donation, £1,000 family support. |
*The figures shown are the amounts of annual expenditure required to achieve the living standard (ie they are not gross income figures).
Remember: the figures above are for a single person household. If you’re planning for two, the numbers are higher across every tier, though not simply double. Sharing a home, a car and household costs means two people can live more comfortably together than the individual figures suggest.
Most people picture themselves somewhere in the middle. But the gap between keeping things simple and living more freely is significant, and the maths behind it is worth understanding.
The number most people haven’t thought about
Take a Moderate retirement for a couple, which costs around £45,400 a year. The full State Pension pays around £11,973 per person, so a couple with both entitlements could bring in close to £24,000. That still leaves a gap of roughly £21,400 a year to cover from your own savings.
Retire at 62 and you could be filling that gap for 25 to 30 years. That’s potentially £500,000 or more, before inflation or tax come into it.
That’s not meant to be alarming. For a lot of people, the maths is genuinely workable. The problem is most people haven’t sat down and looked at it yet.
Important reminder: This article is for information only and does not constitute personal financial advice. The value of investments can go down as well as up. Your actual retirement position will depend on your personal circumstances.
Three questions worth asking yourself
Most retirement planning comes down to three things.
- What lifestyle do I actually want? Not a vague sense of what feels comfortable, but what does a typical week look like? Where do you go on holiday? Do you have a car? Are you helping your children or grandchildren?
- When do I want to stop working? Each year you retire earlier is a year less of saving and a year more of spending. The timing matters more than most people realise.
- What have I got, and what is it doing? How much is in your pension? Your ISAs? Your investments? And is it invested in a way that gives it a real chance of growing?
Very few people land neatly in one tier. You might want a bigger holiday budget but be perfectly happy without a second car. You might prioritise helping your kids over eating out. That’s fine! That is exactly how it works in practice.
So, how much do you need?
The honest answer is: it depends on you.
But you can get a much clearer picture in about five minutes. Our retirement calculator asks you a few simple questions, your assets, your target age, your goals, and gives you a view of where you stand today.
Talk it through with an expert
If you’d rather skip the calculator and speak to someone directly, an Octopus Money expert can give you a clear picture of where you stand and what to do next.
Important information
The initial free session with a coach or adviser does not include regulated financial advice or personal recommendations. If regulated financial advice may be appropriate for you, Octopus Money will explain what that involves and how it can be accessed separately. We will always clearly signpost when you are moving from a guidance session into a regulated advice session.
If you’re matched with an FCA-regulated adviser, they’ll clearly explain which parts of our service are regulated.
If you’re matched with a financial coach, they will not provide regulated financial advice or recommend specific products. You’ll receive guidance on possible next steps to help you understand your options.