For many people, retirement promises freedom and time to pursue activities they might have spent years dreaming about. But how much money do you actually need to retire as a single person in the UK? Let’s take a look.
How long will your retirement last?
According to the Money Advice Service, retirement can last for 30 years or more depending on when you retire and how long you live.
A 65-year-old man, for example, has a 50% chance of living to 87. A 65-year-old woman, on the other hand, has a 50% chance of living to 90.
If you’ve only planned for 20 years of retirement and you live longer than this, you could find yourself struggling later in life.
Consequently, you need to save enough or set up sufficient sources of income to provide you with enough money to live on for the whole of your retirement.
As a single person, how much do you need to retire in the UK?
There is no single, accurate answer to this question. It largely depends on the lifestyle you wish to have in retirement.
However, using independent research by Loughborough University, the Pensions and Lifetime Savings Association (PLSA), has compiled a Retirement Living Standards guide to help people get a rough idea of how much money they might need to retire in the UK. The guide shows what kind of lifestyle a person can expect depending on their retirement income.
For a ‘minimum’ standard of living, a single person would need to have an annual retirement income of around £10,200. This amount would cover all of their basic needs, including housing and groceries, with some left over for fun and social activities.
With a minimum standard of living, a single person could enjoy a week and a long weekend holiday in the UK once a year. You could also eat out once a month and participate in leisure activities twice a week.
Through a combination of the full new State Pension of £9,330 per year and auto-enrolment in a workplace pension, this is a level that is achievable for most people in the UK.
For a ‘moderate’ lifestyle, the annual income a single person in the UK needs to retire is about £20,200. The moderate lifestyle provides more financial security and flexibility. You could have a week-long European holiday every year, eat out several times a month and comfortably run a car.
According to the PLSA, the benchmark for a ‘comfortable’ retirement is £33,000 a year for a single person. For this amount, you can get a lifestyle that allows you to be more spontaneous with your money. For example, you would be able to go on two foreign holidays a year and enjoy regular beauty treatments.
How can you make sure you’ve saved enough?
The bigger the retirement fund you can build while still working, the better your chances of enjoying a comfortable retirement.
Time is your most powerful retirement saving tool. The sooner you start saving for retirement, the more time compound interest has to work its magic and turn your savings into a sizeable sum that can comfortably support your retirement.
Experts recommend that you begin saving for your retirement as early as when you are in your 20s. At the same time, don’t panic if you have not begun saving yet. It’s never too late to start.
Putting some money aside in your final years before retirement is a lot better than doing nothing. You could still contribute to a workplace or personal pension. Another option is to invest in the stock market through a tax-efficient vehicle such as a stocks and shares ISA.
Finally, consider consulting a financial adviser. They can help you figure out exactly how much you’ll need for the retirement lifestyle you desire. They can also help you develop a strategy for getting there.