How much money you will need for retirement is one of those imponderable questions that is almost impossible to answer.
To calculate the right amount, you need to know how much you will spend each year and how many years you are likely to live.
Clearly none of us know either of the figures, so we are left at making a guess.
But you can get closer to the right figures by not overlooking some obvious costs that can make a big difference to your standard of living.
Time is one – everyone has more time on their hands in retirement and how you spend that time also depends on how much money you spend.
For most, reading and watching TV has a limit, so some other entertainment or hobby is an important part of life.
Family finance trap
But spending just £10 a day on entertainment cann add up over a year to £3,650. If you budget was for £30,000 a year, if that additional spending was not included, that’s more than 10% of annual spending eaten up.
Then there’s the unexpected but unavoidable spending. The heating springs a leak, tiles blow off the roof, the car needs repairs to pass the MoT and so on.
An unforeseen £500 bill can put another dent in your retirement budget.
The rising cost of living is predicted to range between 2% and 3% in the UK for the foreseeable future – that’s a loss of spending power of around £900 a year.
Many over 55s are caught in the family finance trap, which means paying down living costs for parents and children.
Budgets are important
Caring for relatives while funding the lifestyle of children can soon drain a retirement fund if you do not carefully watch where the money is going.
Retirement budgets are important – the spreadsheets can identify precisely what you are spending and where the money is going. The aim is to get a better grip on your cash and to try and cut out the waste.
The Money Advice Service offers a lot of free and independent money and budget advice for retirement – including some useful online calculators.
Another free resource packed with sensible financial advice for retirement is provided by consumer magazine Which?