How much money will you need to retire?

You may be approaching retirement or it may be some years off, but it’s useful to try and work out how much money you will need to retire.

It’s helpful to start by thinking about when you might retire, so you can consider how long your retirement might be?

It’s hard to know how much money you will need to retire, and most people underestimate how long they will live, but there are things you can think about to help you decide if you can afford to retire.

Your income options

Are you planning on taking early retirement, if so when might this be and are you planning to use any other money towards this, such as downsizing your home or cashing in any other investments?

Will you retire completely, or perhaps carry on working part-time for a while?

Do you have a partner who will also have pension income or do you need to support dependents?

How much will I spend?

It’s good to start by calculating your fixed costs, and factoring in things like whether you will have paid off big monthly expenses like your mortgage?

Many people aim to have between half and two thirds of their final working salary in order to live comfortably in retirement.

However, people  often overestimate how much they will spend. A study by Which found that the average retiree household spent around £25,000 a year, taking into account all basic expenditure and some small luxuries.

Budget according to your lifestyle

The same study estimated you would need around £40,000 per year if you wanted to plan for luxuries such as long-haul trips and regularly replacing your car with a newer model.

And the way you spend might change through your retirement with many people spending less on groceries as dependents move out, but more on things like recreation and holidays.

It’s important to also consider any insurance premiums which may increase as you get older.

How much will you need in your pot?

You’ll have separate elements to your pension, a state pension and any private pension.

The maximum state pension (for people reaching retirement age after April 2016) is £175.20 per week, but you should check your projected state pension as you might not get the full amount.

It’s sensible to also pay into a private pension plan. There are lots of different types of pension schemes, and it’s important to help you find the right one for your needs.

A good financial advisor can help with this and they can also take you through some cashflow modelling so that you can decide how much to pay into your pot, so you will have the money you will need to retire.

At Amethyst we can help you have the retirement you want, so don’t hesitate to get in touch.

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