The steps you need to take to enjoy a comfortable post-work life

What do you think of when you picture retirement? Daytime television adverts usually depict an impossibly healthy couple sailing into the sunset, laughing manically at nothing in particular.

At the other end of the spectrum, campaigners and the media often highlight the struggle older people face heating their homes or simply making ends meet.

I suspect most Shares readers are aspirational when thinking about retirement, aiming for the financial freedom to enjoy life. But what steps do you need to take to get to the retirement   you want?

While annual incomes are on average £6,000 a year lower in retired households (£23,900) compared to non-retired households (£29,700), there are some things we continue to splash out on regardless of age.


You’ll need to consider both your state and private pension entitlements when figuring out the income you’ll have in retirement. The current flat-rate state pension is worth £168.60 a week (£8,767.20 a year) and rises in line with the highest of average earnings, inflation or 2.5% each year.

It’s worth noting you may get more or less than this if you built up state pension rights under the old system or have a patchy National Insurance record. The state pension age is currently rising to 66 by October 2020, with further increases planned to 67 by 2028 and 68 by 2039, so you’ll need to factor this into your retirement planning.

If we assume you get the full flat-rate amount from age 65, plan to retire at that age and have no other income sources, you’ll need roughly £15,000 a year more to enjoy an ‘average’ retirement (based on ONS stats).

If you keep your pot invested in drawdown and withdraw 4% each year (rising annually with inflation) you’ll need a fund of around £375,000 in today’s money to reach that target.

If your target is a more frugal retirement or you have other sources of income, a pot worth £250,000 should generate an income of £10,000 a year. For those eyeing a more luxurious retirement, a fund of £500,000 could deliver a 4% annual income of £20,000, while you’ll need £750,000 to generate an income of £30,000 a year.

These numbers are just a guide on what might represent a sustainable retirement income, so it’s vital to review your plans regularly to make sure you’re on the right track.

While hundreds of thousands of pounds might sound like a mountain to climb, it is achievable if you start early and save often. For example, someone earning £30,000 who saves 8% of their salary from age 25 will get to a fund of almost £200,000 in today’s prices (assuming investment growth of 3% above inflation).

That works out as an annual contribution of £2,100 a year, or about £40 a week. Save more and that number will escalate – although if you delay contributing to a pension you’ll need to set aside more to reach your goal.

And don’t forget your contributions will be topped up by a tax relief bonus of at least 20%, with even more available for higher and additional-rate taxpayers.


Clearly what you spend in retirement will depend on your personal circumstances. However, to give you an idea of what your costs might be let’s consider official data from the Office for National Statistics (ONS).

People’s spending patterns fluctuate throughout their working lives and into retirement, reflecting shifting priorities as we grow older.

Former Oasis frontman Liam Gallagher was in his twenties when he complained his search for ‘action’ only led him to ‘cigarettes and alcohol’, but it turns out those aged 65 to 74 are more likely to splash the cash on fags and booze than most other age groups.

On average those aged 65 to 74 spend just over £550 a year on alcoholic drinks, equivalent to £10.60 a week. That’ll buy you a decent bottle of plonk or a couple of four-packs of lager every weekend.

Perhaps unsurprisingly money spent on alcohol away from home tends to fall as we get older, suggesting a big night on the town for many is replaced by a more frugal and potentially quieter night in.


Retired households are significantly more exposed to shifts in energy and fuel prices than their younger counterparts.

The cost of heating your home tends to remain relatively unchanged throughout your life, but represent a far bigger proportion of expenditure for retired households.

Average annual bills for over 65s were north of £1,100 in 2017/18, representing almost 5% of the average retired person’s income. A non-retired person would face broadly similar energy costs but with their income higher, the impact of any price changes would be lower.


Thankfully retirement is about more than drinking, smoking and worrying about your fuel bills, with those who have just reached state pension age spending around £1,700 a year on package holidays, more than any other age group.

That could buy a week all-inclusive in the Canary Islands for two people in a four-star hotel or a seven night cruise round Spain and Portugal.

By comparison, those aged under 30 spend just £700 a year on package holidays while the 30 to 49 age group splurge just under £1,300 a year – although this might reflect the fact younger people are more likely to arrange their own trips rather than opt for a package deal.

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