How to create the retirement lifestyle you imagine

How much money will you need to make your retirement dreams a reality? The short answer is: more than you might think.

One reason why is that we’re living longer, which is great news. But it means 35-40 years of work have got to pay for a retirement that could last nearly as long. Most of us need to start saving earlier and start saving more.

Early on in our working life, retirement can feel like a distant event, so planning for it is easy to postpone. And that can be where the problem starts. According to the Office for National Statistics, as of March 2022, over half of adults (56%) were not saving towards a pension¹. So, it’s not surprising that nearly three-quarters of 45-60-year-olds are worried about their financial situation in retirement².

Retirement reset?

It’s natural for us to want financial freedom and security in retirement, rather than a lifestyle where we’re ‘just getting by’. But what will it cost?

Figures from the Pension and Lifetime Savings Association suggest that a couple need an income of £60,600 a year to enjoy a comfortable retirement lifestyle³. But what does ‘comfortable’ look like? Things like having a fortnight’s foreign holiday, three UK weekend breaks, changing the car every five years, £75 a week on groceries and £54 a week on hobbies and activities.

After taking into account the full annual state pension of around £12,500 each, a couple need a combined pension pot of about £778,000 in today’s terms to make up the shortfall and achieve that comfortable lifestyle⁴.

When you consider that the average pension savings for 55–64-year-olds is around £138,000⁵, it’s clear there’s a big gap between many people’s hopes for retirement and the reality.

Despite this disparity, 60 is reported as the preferred retirement age among the working population⁶. Unless something changes, a huge number of people will need to rethink their retirement aspirations. And dreams of an early retirement will remain just that.