How Much Income Will I Need in Retirement? | HK Wealth

Everyone’s idea of what income is needed to provide you with an ‘acceptable standard of living’ in retirement is different. In addition, no estimate remains the same for long as prices and the cost of living change year-on-year. However here, drawing upon published material from Standard Life and the Joseph Rowntree Foundation (JRF), we look at some estimates and invite you to look at how your hopes and expectations for quality ‘Golden Years’ in your retirement, stack up.

The Rowntree Foundation figures, from surveying members of the public, suggest that the income needed for a single retired person to gain an ‘acceptable standard of living’ is £9,500 p.a. (the basic State Pension currently provides around £5,880 p.a.). What expenditure the JRF believes should be part of your ‘acceptable standard of living’, beyond paying for food, energy and shelter etc, includes:

Buying birthday presents.
One week’s holiday in the UK per year.
Six day trips per year-on-year.
Enough to buy alcohol and visit the cinema.
To have a mobile phone, a DVD player and a fridge-freezer.
JRF also assumes within its calculations that any mortgage debt will have been paid off.
What the JRF £9,500 calculation does not allow for, includes:

A car – assuming the use of public transport.
The cost of internet access and paid for TV films or sports channels.
A dishwasher.
Cigarettes.
An assumption that less than £20 p.c.m will be spent on eating out.
The JRF survey calculations ran several ‘add-on’ calculations to their survey, as well as providing information suggesting that retired people living as a couple needed £13,700 p.a, compared to the £9,500 p.a for a single person.

For your ‘Golden Years’ in retirement:

Add to basic £9,500 p.a your choices… Estimated cost p.a Income after tax, now needed p.a
Add two weeks holiday each year Add £2,875.00 £12,375.00
Add four weeks in the sun each winter Add £5,500.00 £15,000.00
Add a car with a five yearly upgrade Add £7,462.50 £16,962.50
Add annual Health Club membership Add £750.00 £10,250.00
Add a concert, play or show once a month Add £1,500.00 £11,000.00
Add a weekly dinner or drinks with friends Add £2,250.00 £11,750.00
Add shopping trips for you and the family Add £1,875.00 £11,375.00
Add home improvements Add £3,750.00 £13,250.00

If your ‘acceptable standard of living’ for your Golden Years includes all of the above, then the JRF calculations tell you that you will need a personal disposable annual income of £35,462.50! Will your pension pot, pension entitlement and savings deliver your ideal Golden Years experience? If not, then it is not too late, but the time to start planning and saving may well be now!

Sources: www.jrf.org.uk; www.standardlife.co.uk (Published data and commentary: January 2015)