When you think of a comfortable retirement, what do you imagine? Maybe you’re dreaming of finally booking that trip to Thailand, or taking up that obscure, time-intensive hobby you’ve been waiting to try. Or maybe you’re just looking forward to getting away from the daily grind, stepping back from work and spending your days however you choose.
Yet how much choice you really have during that time depends on the financial decisions you make now. A truly comfortable retirement is one that gives you the freedom to choose – to book that holiday, to buy those golf clubs, to have brunch with your friends – without worrying about every penny you spend.
With the world, and the cost of living, constantly changing, how can you make sure you are on track to achieve the comfortable retirement you imagine, with enough income to make it an enjoyable and secure, rather than stressful, experience?
The rising cost of retirement
The cost of living is climbing, and retirement is no exception. For many, it’s becoming harder to stretch retirement savings as inflation continues to rise, particularly with the current economic climate in the UK. According to research by Which? a single person in retirement will need around £19,000 a year to cover basic living costs like food, utilities, and housing. If you’re envisioning a life that’s a bit more colourful – more travel, more dining out, more experiences, more choices – you’ll need closer to £23,300 for a moderate lifestyle, or £37,300 for something more comfortable. These numbers can be overwhelming, but they give a solid starting point for what to aim for.
You probably won’t be surprised to learn that the State Pension isn’t enough to fully cover most people’s retirement needs. As of April 2024, the full new State Pension is just over £11,502 a year—leaving a significant gap for those hoping to live more comfortably.
How much income will you need for a comfortable retirement?
Planning a comfortable retirement is not just about lifestyle and everyday expenditure. What many people forget to plan for is those one-off costs that spring up every now and again and can’t be avoided. Will your car still be running after 5 years? How much will you be spending on repairs to keep it in shape? What about your property; are you going to be happy with your house exactly as it is 10, 15 years into your retirement? Chances are there will be both practical repairs and cosmetic changes around your home that need to be accounted for in your budget, even if you plan to downsize later on.
You also need to remember that your lifestyle will change during the course of your retirement. Yes, early retirement should be about travelling, enjoying your time and indulging where possible, but you do also need to think further into the future. How do you plan to spend your later years, and what money will you need to cover your comfort then? You may need to pay for care in your own home, or could have to consider a move to a care home. Making sure you have enough funds to pay for the care you want will mean a more comfortable, less stressful, later retirement.
Outside of your personal circumstances, there is also a bigger picture to consider: political changes, inflation, global events, and taxation. This is often the aspect of retirement planning that can be the most daunting, and is undoubtably the most difficult part to plan for. This is why getting professional retirement planning advice becomes crucial. At Flying Colours, we can help you to plan for almost every possibility with cashflow modelling, which stress-tests your finances against different events, allowing you to adapt your plans accordingly.
What should you do now to plan for retirement?
The first step in any retirement plan is to take a good, hard look at your current finances.
- How much do you have saved in pensions?
- Do you have multiple pensions, and are you keeping track of all of them?
- Do you have any ISAs or other tax efficient savings?
- What other assets do you have?
- Do you have any debts or mortgages?
- How does your current spending compare to what you expect your retirement spending to be?
It’s never too early to start planning, and it’s never too late either. If you’re in your 30s or 40s, you have time to build a strong retirement pot. If you’re in your 50s or older, you might need to start thinking about catch-up contributions or tweaking your plans. No matter what stage of life you’re in, setting aside time to review your pension contributions, ISAs, and other investments will put you in a better position.
Employer pension schemes, especially those that match contributions, or offer salary sacrifice arrangements, are powerful tools. Think of it as ‘free money’ toward your future. If you’re self-employed or don’t have a workplace pension, opening a personal pension is a great alternative. If managing all of this sounds daunting, remember that you don’t have to go it alone—a financial adviser can help you make decisions that are tailored to your circumstances.
What happens if your retirement, work, or life plans change?
We all know that life doesn’t always go as expected. Having an emergency contingency fund is a great way to prepare for life’s curveballs while you are still working. Keeping some liquid savings aside for unexpected expenses, such as unexpected repairs, healthcare or family support, means you’re not forced to dip into your retirement savings when you’d rather not. If you never need it, you can still add it to your retirement funds later on.
When it comes to your actual retirement, even the best laid plans don’t always pan out as expected. You might need to retire earlier than planned due to health reasons, or perhaps you want to keep working part-time because you enjoy it. You might also have family commitments or personal circumstances that shift your priorities before your retirement date rolls around. It’s normal to face the unexpected, which is why flexibility is key in any retirement plan.
Don’t be afraid to adapt. Retirement isn’t a one-size-fits-all, and what looked like it would work for you at 40 may not be ideal by the time you hit 65. A good financial adviser can help you to navigate this and get the flexibility you need from your retirement planning. You can read more about how to adapt your financial plan through significant life changes in our blog: How to adapt your financial strategy.
How can you calculate what you need to retire comfortably?
There’s no one answer to how much you’ll need to retire comfortably: it depends on your lifestyle, goals, personal preferences, where you live and what you do for a living. That said, the basic formula involves calculating your expected annual retirement expenses, subtracting any guaranteed income, and then determining how much you’ll need from other sources like personal pensions, savings, and investments to cover the rest.
Many online retirement calculators can give you a rough estimate based on your savings and projected spending, but bear in mind that these tools don’t always account for things like inflation or changes in government pension policies, so it’s worth reviewing your plan regularly. A financial adviser can help ensure you’re making the right adjustments along the way.
Personal advice on planning for a comfortable retirement
Ultimately, a comfortable retirement is one where you can live the life you’ve dreamed of, without worrying about whether you’ll run out of money. The key thing is to face your retirement planning head on, whether it feels so far in the future it’s hard to imagine, or so close it feels impossible to prepare for. By making a plan and staying flexible, you can set yourself up for a fulfilling retirement that’s not only financially secure but filled with fun and possibility.
It can be nerve-wracking making financial decisions today that will affect such a big part of your future, but we can help. If you’re looking for a personal retirement planning advice that’s truly tailored to your needs, your goals and your lifestyle, speak to one of our team of financial advisers. Our mission is to help you enjoy your wealth today, while preparing for the retirement you want.
Call our offices:
Lincoln: 01522 437 360
Liverpool: 0151 317 7820
Bracknell: 01344 266030
or email: hello@fcadvice.co.uk
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance and you may get back less than you originally invested.
