As inflation continues to make our lives harder, the cost of living is turning into a downright crisis, with many people struggling to put food on the table. Compared to 2022 alone, the cost of living has increased by as much as £2000, which is causing complications in retirement savings too.
With inflation on the rise, what’s the best age to retire, and how much do you need to retire and live a comfortable life? This guide explains all of the above, so make sure to read till the end, and find out everything you need to know!
What Lifestyle Do You Want After Retirement?
Every single person’s lifestyle is unique and different from the rest, which is why it can be difficult to pinpoint exactly how much you need to save up for retirement. However, to make it easier, the PLSA (Pension and Lifetime Savings) categorises lifestyles into three sections:
- Minimum: Enough savings to cover just the essentials
- Moderate: Savings with a bit of flexibility
- Comfortable: Savings that give room for financial freedom and luxury
In addition to that, you also need to keep in mind how many vacations you’ll be taking in a year after retirement, how often you’ll be changing your car or any big life events that you might be catering your savings towards.
How Much Will You Need After Retirement?
The most common mistake that often people make while figuring out their ideal retirement income is basing it on their salary. It’s important to understand that after your retirement, your expenses will greatly drop down as you won’t be commuting to work, or eating out as much.
However, at the same time, your living costs may vary later in life, since you’re going to be spending less on housing costs like mortgages, and more on things like healthcare, insurance, bills and more.
That said, according to research conducted by the PLSA, retired couples living outside of London spent an average of £32,000 in the year 2022, and with inflation costs soaring in 2023 too, this number only goes higher as time progresses.
How Much Do You Need To Save
There are a lot of saving schemes out there that will help you systematically save money for that retirement life, but we recommend this saving tactic to easily save up for the future.
As a general rule of thumb, what you need to do is take the age when you’re starting to earn and save, half it, and save that percentage of your earnings every month. So, for example, if you’re 20, you need to save 10% of your earnings. If you’re 30, you need to save 15%, and on and on.
Summing It Up
As inflation continues to soar, saving up for retirement gets more and more difficult, as the cost of living is getting higher and higher, and the dreams of living a comfortable life after retirement seem to be pretty far-fetched.
However, we’ve provided an excellent framework and a direction for you to save up for a good life after retirement, so make sure to follow that, and keep on the lookout for related blogs that will help you achieve the life you always dream of having!