The cost of living crisis and high inflation means purchases and bills are now more expensive. Millions will need to take this into account, but for those leaving the workforce, the matter becomes particularly pressing.
Leaving a salary or wages behind means Britons will have to manage their money carefully – and understanding what one needs for retirement is key.
Jonathan Watts-Lay, director at WEALTH at work, urged people to check if they can afford to retire.
He said: “Do you have enough put aside to be able to afford to retire or do you need to work a little longer, or perhaps work part-time?
“Many people may be questioning this right now, especially if their pension has fallen in value due to market volatility.”
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For example, for a single person this would cover a £41 weekly food shop, a week and long weekend staycation each year, and £410 for clothing and footwear annually – but no car.
A moderate standard of living offers more financial security and flexibility – at £20,800 per year.
This would cover a £47 weekly food shop, a two week holiday in Europe and long weekend in the UK each year, £730 for clothing and footwear, and a three-year-old car, replaced every 10 years.
However, many retirees will be striving for a “comfortable” standard of living, where they do not have to worry about making ends meet.
According to the PLSA to achieve this, single people will need at least £33,600 per year.
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This allows more breathing space, such as a £59 weekly shop, a three-week holiday in Europe, £1,200 for clothing and footwear, and a two-year-old car, replaced every five years.
Couples are likely to need £17,000 for a minimum standard of living, £31,000 for a moderate standard of living, and £50,000 for a comfortable living standard in retirement.
For most people, the state pension and private pension arrangements will go a long way to covering these costs.
Currently, the full new state pension is worth £9,339 per year – although not everyone will receive this sum, based usually on their National Insurance contributions.
Savings through workplace arrangements or private savings could also help give retirees a boost in meeting living standards goals.
However, the PLSA states other costs may also need to be considered once a person leaves the workforce.
This includes mortgage, rent, social care costs, and any tax on pension income.
Mr Watts-Lay concurred, suggesting certain circumstances must be considered when a person works out how much they need.
He continued: “When doing your sums, don’t forget to consider how long you think you will live as research has found most people live longer than they expect.
“The Office for National Statistics (ONS) estimates average life expectancy in the UK for people aged 65 will be 85 years for men and 87 years for women.
“Also, keep in mind that when you retire, you are likely to be paying less income tax, no National Insurance (NI), mortgages and loans may be paid off, you will have no more pension contributions, and any children are likely to be financially independent.
“With these reductions in costs, the income you need in retirement is likely to be significantly less than you require during your working life.”