Everybody is different, so everybody’s retirement lifestyle will be different, too. By planning what you want from later life and how much money you’ll need, you can learn how to build a life you’re happy with when you retire.
This article will help you understand how to figure out your perfect retirement and the steps to get there. We’ll also explain the different kinds of retirement lifestyles and point you in the direction of bespoke retirement planning advice.
What retirement lifestyle do you want?
According to the Pensions and Lifetime Savings Association (PLSA), there are three retirement categories for your standard of living in retirement. These are:
- Minimum retirement.
This means enough money to cover your essentials and not much else.
- Moderate retirement.
A moderate retirement lifestyle gives you more flexibility and financial security.
This means financial freedom in the form of holidays, cars, and other luxuries.
To find your ideal retirement lifestyle, consider things like how many holidays you’d like to go on, the car (if any) you’d like to drive, if you’d like to renovate your home, and more.
You might also want to pay for key milestones in your children’s or grandchildren’s lives such as weddings, house deposits, or university fees.
How much money do you need to retire?
Your outgoings tend to decrease as you age, especially if you pay off your mortgage before retirement. You’ll likely spend less time travelling since you don’t have to go to work, too, but it isn’t all good news.
Living costs are on the rise and as of 2022, the average retired couple living outside of London spend around £34,000 annually, without housing costs. This would be considered close to a moderate retirement lifestyle and has increased by almost 20% compared to 2021.
According to PLSA, for a comfortable retirement lifestyle with two cars and a three-week holiday, a couple will need around £59,900 per year. For a fifteen year retirement, this would mean around £898,500 of total retirement savings.
As well as living costs, life expectancies are also increasing which is great news on paper, but means you may need to save even more.
How to save for retirement
Generally, your pension income will come from your state pension, a private pension (which may include a workplace pension), and income from investments, property, and other sources.
A common method to figure out your contributions is to half your age when you start saving for retirement and use that as a percentage of your income to save.
For example, if you start at 20 years old, save 10% of your income and put it into your pension fund. 40-year-olds should contribute at least 20% of their income, and so on.
You’ll also need to consider your life expectancy and inflation, too, which again may mean that you need to save more than you think. That’s why it’s never too early to start planning for your retirement.
Conclusion
At Cedar House Financial, we can help you establish a clear path to retirement. With investment strategies that help you ride out inflation and grow your pension fund steadily over time, we have the experience and knowledge to help you achieve your retirement goals.
We can also help with estate planning so you can leave your loved ones with more than just memories when you pass. To find out more about our retirement planning service, contact our team.