Here’s how much income you need for a comfortable retirement: the State Pension isn’t enough!

The State Pension isn’t enough for a single person to live even a basic lifestyle in retirement, according to new research.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One of the most challenging aspects of retirement planning is working out how much income you’ll actually need. Ultimately, it comes down to what type of lifestyle you’re planning to live in your later years and whether you’re planning to live frugally, or live it up.

To help those retirement planners determine post-work income requirements, the Pensions and Lifetime Savings Association (PLSA) has put together a new set of ‘retirement living standards’, which details roughly how much money you need per year for different retirement lifestyles. Here’s a look at how much annual income the trade association believes is needed.

Single person income requirements

The PLSA believes that in order to live a ‘minimum’ lifestyle, a single person requires income of around £10,200 per year. This would cover all basic needs, with some money left over for ‘fun’, apparently.

However, if that person wanted to live a ‘moderate’ lifestyle, they’d need nearly twice that – £20,200 per year. This kind of lifestyle would provide more flexibility. To actually live a ‘comfortable’ lifestyle, a single person would require annual income of around £33,000. This would provide for luxuries such as multiple trips to Europe each year.

Source: The Pensions and Lifetime Savings Association

Couple income requirements

For couples, retirement income requirements are different because costs can be shared. Here, the PLSA believes that to live a minimum lifestyle, a couple need income of around £15,700 per year while, for a moderate or comfortable lifestyle, £29,100 and £47,500 is required, respectively.

Source: The Pensions and Lifetime Savings Association

So, what are the takeaways here?

The State Pension isn’t enough

One key takeaway is the State Pension isn’t enough to provide a single person with even a minimum lifestyle. At £8,767 per year currently, it’s well short of the £10,200 that’s needed to live a basic lifestyle as a single person.

If a couple were both entitled to the State Pension and were receiving £17,534 in income per year from the government, they may be able to get by. That’s more than the £15,700 annual income that the PLSA says is required for a couple to live a basic lifestyle. However, if that couple wanted to live a moderate lifestyle, the State Pension would be very much inadequate – the couple would need nearly 70% more income.

Act now before it’s too late 

Overall, these new retirement living standards are a reminder of just how important it is to plan and save for retirement. In most situations, the State Pension will not be enough to live a comfortable lifestyle. As such, it’s crucial to think about your retirement income needs ahead of time and start building up a retirement pot as early as possible. The sooner you start saving for retirement, the more chance you’ll have of living a comfortable lifestyle in your later years.

If you’re looking to learn more about saving and investing for retirement, you’ve come to the right place.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Retirement Articles

Young female analyst working at her desk in the office
Investing Articles

Here’s how I’d target a £23k second income with £300 a month

If I was building a shares portfolio today, here's how I'd go about it. With these strategies I stand a…

Read more »

Investing Articles

How I’d invest my first £1,000 in a SIPP

Investing the first £1,000 in an SIPP can be a daunting process, especially for new investors. Zaven Boyrazian explains what…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »

Investing Articles

How I’d invest within a SIPP to target a 7% dividend yield

Zaven Boyrazian explains the steps he’d take to target a high-yield, income-generating SIPP for 2024 and beyond by investing in…

Read more »

Investing Articles

No pension at 50? Here’s my SIPP investment plan to target £16k a year in passive income!

With disciplined saving, a solid investment plan and the tax benefits of a SIPP, it’s possible to turbocharge pension growth…

Read more »

Young woman holding up three fingers
Investing Articles

These 3 investing steps could make me an £11,680 passive income!

If I was starting out on my investing journey, here's how I'd try to build a robust passive income with…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

Small SIPP at 55? I’d take these steps to boost my retirement savings

With a consistent savings plan, sound strategy, and some wonderful tax relief in a SIPP, it’s possible to massively grow…

Read more »

Investing Articles

Value, growth and dividends! 3 ETFs I’d buy in a Stocks and Shares ISA

Royston Wild believes these UK-listed exchange-traded funds (ETFs) could help him create a winning Stocks and Shares ISA.

Read more »