How Much Cash Will You Need For Retirement?


One of the problems for pension savers is working out how much to save to make sure they can afford a comfortable retirement.

None of us know how long we are likely to live – and how much will might need to spend on long term care in our later years.

Secretly, everyone is worried that their savings will run out before they die, but no one really knows how much to realistically put away.

But the government’s Office of National Statistics has come up with some helpful data that should put a few minds at ease.

The number crunchers have worked out that the average pensioner has an extra £10,250 a year to spend on top of their state pension, which comes from investments, pensions or annuities.

Rainy day cash

That will make a lot of savers approaching retirement feel a lot better – until they release how much they need invested in today’s economic climate to hit that target.

A 65-year-old not counting on an enhanced annuity would need capital of around £180,000 to generate anywhere near that return – which is a yield of 5.6% – says finance specialist Saga Investment Services.

If you want that with index-linking, the fund will have to be much higher – almost £290,000.

With the Bank of England official interest rate pegged at 0.5% for nine years and governor Mark carney suggesting rates will not increase for perhaps as far as 18 months or more, the return on savings is unlikely to improve in the foreseeable future.

“The over 50s should keep some rainy day cash, but if they want to make some money the best bet is the stock market,” Gareth Shaw, head of consumer affairs at Saga.

ISAs and pensions

“ISAs are one way to do this, the other is increasing pension contributions if you are approaching retirement.”

Shaw explained that £10,250 annual return may mean investments paying out £250,000 or more for many retirement savers who can expect to live at least 20 years after giving up work on average.

“Not only does the investment have to pay out that cash, but to keep doing so, the fund has to stay at the same level or replenish from any drawdowns,” he said.

Read more about financial issues retirement savers cannot ignore in 2016

Download the Free Pension Transfer Guide

Expat Pension Transfers Guide expert writers have created a simple guide to Expat Pension Transfers just for you.

Find out how you could save tax, increase growth and investment opportunities with this simple, no-nonsense guide that will introduce QROPS, SIPPs and QNUPS options and talk through the pros and cons. Download the free guide by following the link below


  1. How much you will need for retirement will depend on the lifestyle you plan to lead once retired. Will you travel? take up expensive hobbies? downsize? live frugally? relocate? It is also important to stay healthy in retirement. First because you will be better able to enjoy life and second, medical costs will most likely be greater if you are not healthy. I just read several good posts and pages on aging, health, traveling and downsizing on the site Retirement And Good Living. The site offers information on many retirement topics and also has a couple of retirement and health calculators.

Leave a Reply