Everyone dreams about retiring but worries about the cost of a life of luxury without having to get up for work.
For many, the dream is just that unless they win a lottery.
But diligent savers would love to know how much money they really need in the bank to pay for retirement if they don’t have the good fortune to win or inherit a decent pot of money.
Research suggests three out of four savers can’t put their finger on the figure they need to retire and only one in five are confident they are putting aside enough each month.
To try and shed some light on one of our most baffling financial mysteries, the Pensions and Lifetime Savings Association (PLSA) has set some retirement living standards designed to help savers picture what lifestyle they want after work, and how much money they’ll need to reach their goal.
What are the retirement standards?
The PLSA has three living standards; minimum, moderate and comfortable.
For a singleton to reach the minimum standard they would need an annual income of £10,200. A couple would need £15,700.
Hitting this level would allow some social occasions and a little luxury, but means they are unlikely to afford a foreign holiday or to run a car.
To reach a moderate lifestyle a single person would need an income of £20,200 a year and a couple would need £29,100. This amount to spend would allow a little more indulgence. Maybe a two week holiday in Europe every year, and the cash to run a newish car.
The comfortable living standard means earning £33,000 a year for a singleton and £47,500 for a couple. This gives a more lavish retirement including extended trips abroad, running a newer car and spending more on food and clothing.
Diving into the data
The figures are not set in stone as everyone has a different view of what their retirement holds and how much they need to fund it.
if an 18 year old starting working earning £18,000 a year wanted a moderate lifestyle in retirement, they would need to pay 8% of their salary into their pension, and assuming their entitled to the full state pension, by the age of 68 they’d end up with an annual retirement income of £19,100 a year.
A 35 year old today earning £46,000 a year with a £50,000 pension pot saved still needs to pay a fifth of their salary into their pension each year, plus be entitled to the full state pension to reach the comfortable zone.