Finance

How Much Do You Really Need to Retire?

How much do you really need to retire

If you’ve observed the continually rising retirement age in the UK, you’ll know that state pension funds on these shores are being gradually exhausted.

In fact, some reports suggest that the state pension pot could run out by 2032, making it more important than ever that you take control of your own financial destiny.

But how much do you really need to retire, and is investing a superior option to saving money for this endeavour?

How Much Cash Does a Retiree Need?

According to most experts, your total retirement income should comprise around 80% of your final pre-retirement annual earnings, accounting for reductions in tax payments and your overall cost of living.

So, if you’ve previously funded your lifestyle with £100,000 per annum, you’ll need at least £80,000 to enjoy a comfortable existence after leaving the workforce.

Of course, this amount can be adjusted up or down depending on your alternative sources of income, including private and workplace pension contributions and any part-time employment that you continue to enjoy.

Much will also depend on your plans post-retirement, as those who want to travel extensively will have to commit to saving more for their future.

Investing vs. Saving – Which is Best for You?

When choosing between investing and saving as your main source of funding for retirement, you’ll need to make a decision based on your risk profile, existing capital and future goals.

For example, standard savings can deliver a low-risk and incremental savings pot that can sustain a modest lifestyle post retirement, with this ideal for those with simple plans and a reliable workplace pension.

However, those with grander retirement plans or a desire to build a more substantial pension pot may want to consider investment vehicles such as forex or stocks, which can deliver exponential yields while also allowing for speculative trading.

Dying With Zero? A Revolutionary Approach to Retirement

Of course, some will argue that retirement funding is overstated, particularly as much of the wealth accumulated for this purpose often goes unused.

Just one-in-three retirees increase their wealth, for example, while most also curb their spending naturally once they leave the workforce.

In Bill Perkins’ book ‘Die With Zero’, the author discusses his desire to spend every penny earned before he dies, claiming that people save far too much for their retirement and become preoccupied with the concept of saving rather than its core purpose.

Once again, however, this depends on your outlook and plans post-retirement, while your ability to manage money and live frugally is also important when considering a savings approach and target for your future.

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