£19,000 per year necessary for a ‘comfortable’ single-person household retirement
Knowing how much money one needs for retirement isn’t an easy number to calculate. However, it remains of vital importance for those seeking comfort as they enter the later stages of their lives.
- ‘Luxury’ retirement – £31,000 (pot size of £671,000 needed for annuity; £422,140 for drawdown)
- ‘Comfortable’ retirement – £19,000 (pot size of £305,170 needed for annuity; £192,290 for drawdown)
- ‘Essential’ retirement – £13,000 (pot size of £123,365 needed for annuity; £77,350 for drawdown)
- Luxury’ retirement – £41,000 (pot size of £757,000 for annuity; £442,020 for drawdown)
‘Comfortable’ retirement – £26,000 (pot size of £265,420 for annuity; £154,700 for drawdown)
- ‘Essential’ retirement – £18,000 (pot size of £47,325 for annuity; £28,810 for drawdown)
- Which? added that these estimates are net of tax and based on someone retiring at 65 and withdrawing all their income through drawdown over 20 years.
- Commenting on the estimates, Becky O’Connor, head of Pensions and Savings, interactive investor, said: “These estimates are a useful guide for people to know the retirement that they are roughly on track for, given their current pension pot size. But the amount we should all aim for is very personal and at the end of the day, depends on circumstances and goals, such as whether you want to leave an inheritance.”
O’Connor also suggested that people may have two come to terms with a potential fall in living standards when they stop working.
“It’s important to think about the lifestyle you have now and how much you would like this to continue when you retire. If your income will be substantially lower, then unless your costs fall dramatically too, you will have to get used to a potential drop in living standards when you stop work,” she said.
“Living costs do tend to fall for retired people and these estimates also assume major expenses like housing costs are largely paid off. But bear in mind any costs you expect to continue into retirement that could eat away at your pot faster, such as housing costs, as well as whether you will need to continue to support adult children or leave them an inheritance, should be factored into your own personal calculation for what your retirement pot should be.”
The Which? drawdown estimates reduce the pot size to nothing after 20 years, which means if you lived to be older than 85, in these scenarios, you would become dependent on the state pension at that point.