How much should you save for retirement?

For many people, retirement is no longer a fixed date, but a gradual process shaped by lifestyle choices, financial goals, and personal wellbeing. There’s no one-size-fits-all answer to how much you should save for retirement, but with thoughtful planning and the right strategy, you can move forward with clarity and confidence.  

Understanding your future financial needs and the options available for building a retirement fund is essential, particularly if you hope to maintain a moderate or comfortable standard of living in your later years.

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While the concept of retirement has evolved, the fundamentals remain the same, at some point, you will need to replace your employment income with alternative sources. These might include a personal pension, workplace pensions, savings, investments, or property income. For those who are already financially secure or moderately wealthy, retirement planning is not about meeting basic needs but maintaining current standard of living, financial independence and, in some cases leaving a legacy.

What lifestyle do you want in retirement?

One of the most personal aspects of retirement planning involves envisioning the lifestyle you hope to enjoy once you stop working. You may be considering whether to remain in your current home or downsize, whether to travel more frequently, spend additional time with family, or pursue hobbies that could come with added costs. These lifestyle choices will significantly influence the level of income you will require in retirement and should be central to any long-term financial planning.

The Pensions and Lifetime Savings Association (PLSA) provides useful guidelines through its Retirement Living Standards, which outline three levels of retirement living: minimum, moderate, and comfortable. According to the most recent figures, a single person would need around £13,400 per year for a minimum standard of living, £31,700 for a moderate one, and £43,900 for a comfortable retirement. For couples, these figures rise to £21,600, £43,900 and £60,600 respectively. These figures include essentials such as food and utilities, as well as extras like holidays and leisure activities, depending on the lifestyle level.

If your retirement plans include enjoying leisure activities, occasional travel, maintaining a comfortable lifestyle, or supporting family, you may be aiming for a retirement standard that goes beyond simply meeting basic needs. Planning for this level of financial independence requires a considered approach to saving, investing, and managing financial assets effectively over time.  

How much will you need to retire?

Translating lifestyle aspirations into a target retirement fund can be challenging. Many people underestimate how long they will live or how much income they will need to maintain their lifestyle. While the commonly cited guideline of needing two-thirds of your pre-retirement income can offer a useful starting point, it should be treated as a general reference rather than a definitive rule. A personalised approach, based on your unique circumstances and aspirations, is essential for effective retirement planning.  

Cash flow planning is a core element of retirement preparation and a key tool we use at TPO. It provides a detailed view of how your finances are expected to evolve over time by projecting income sources alongside anticipated expenses. This allows you to identify potential shortfalls, prepare for significant future costs, and ensure your savings and investments are structured to support you throughout retirement.

By modelling different scenarios, cash flow planning helps clarify complex decisions, such as how, when and where to begin drawing down on your wealth, how to adjust spending as your needs and circumstances change. It offers a dynamic framework for making informed choices and adapting your financial strategy over time.

In essence, cash flow planning acts as a financial roadmap. It gives you visibility and control, helping you maintain stability and confidence while pursuing the lifestyle you want in retirement.

At TPO, cash flow planning is a vital part of retirement preparation, and our models are designed to be ultra cautious. They account for realistic, but conservative rates of return on investments, inflation, potential long-term care costs, and a contingency fund for unexpected expenses. By using conservative modelling, our cash flow planning provides a realistic and resilient framework to help ensure your savings last, your lifestyle is supported, and your financial future remains secure

What is the average amount saved for retirement?

Despite growing awareness around the importance of pension saving, the average amounts accumulated by the time people reach their late fifties remain worryingly low for many. Data shows that by the age of 55 to 59, women typically have around £81,000 in their pension, while men of the same age group have approximately £156,000. These figures illustrate a stark contrast in retirement readiness and highlight the ongoing issue of the gender pensions gap.

To put this into perspective, if someone were to begin drawing down £11,000 annually from a pension pot of £81,000 from age 67, their savings would last just seven years. For a man with £156,000, the same level of withdrawals could stretch over 17 years. This is before taking into account any additional costs or lifestyle choices, and even with the State Pension added in, the income may fallshort of supporting a moderate or comfortable standard of living throughout a typical retirement.

There are many factors that contribute to disparities in pension savings, often reflecting broader patterns and inequalities in the workplace. Career breaks or part-time work taken for personal or family reasons can naturally impact earnings and reduce opportunities to build pension wealth over time. Understanding these influences is key to developing financial plans that are inclusive, flexible, and tailored to individual circumstances ensuring everyone has the opportunity to build a secure and fulfilling retiremen

How much do people spend in retirement?

Actual spending in retirement varies widely, but research consistently shows that spending patterns tend to follow a curve. Many retirees spend more in the first decade after leaving work, while they are still healthy and active, before costs gradually decline. However, in later life, care costs or health-related expenses can cause a second rise in spending.

The PLSA’s Retirement Living Standards (mentioned above) offer a helpful breakdown of what each level of spending supports. At the moderate level, for example, a couple might afford a week-long European holiday and a long weekend in the UK every year, own a car, and spend around £100 per week on food. At the comfortable level, that might extend to three weeks of holidays abroad annually, regular dining out, and higher quality clothing and home maintenance.

Understanding your likely spending habits can help you build a retirement plan that reflects your real-life needs, rather than an arbitrary benchmark.

What options are there for saving for retirement?

There are a number of avenues available when it comes to saving for retirement, and often the most effective strategy involves a combination of different approaches. Workplace pensions, particularly those with employer contributions, remain one of the most powerful tools for building a retirement pot. Auto-enrolment has helped millions of people start saving, but those with higher incomes may want to increase contributions well above the minimum level.

Personal pensions such as Self-Invested Personal Pensions (SIPPs) offer greater control and flexibility, particularly for those with more complex financial situations or larger sums to invest.  

ISAs can also play a useful role, offering tax-free growth and flexible access, which can be particularly valuable for early retirement or to fund specific goals outside of pension rules.

Other investments such as general investment accounts and investment bonds can also be part of a retirement strategy, though they may not offer the same tax advantages as pensions or ISAs.

For business owners, company profits and assets can also be used to support retirement goals.

Investments in property or other assets may also form part of a retirement plan, though they carry their own risks and responsibilities.

In summary, a balanced and well-considered approach, tailored to your lifestyle, priorities, and future plans, is essential for building a secure and sustainable retirement. By combining different savings, investment and pension vehicles and regularly reviewing your strategy, you can create a financial foundation that supports both your needs and aspirations throughout retirement.

Start planning early but review often

Starting your retirement savings early can make a significant difference, thanks to the power of compound growth over time, even small contributions made consistently can grow substantially. However, retirement planning isn’t a one-off exercise. Your goals, lifestyle, and financial circumstances will naturally evolve, and your plan should evolve with them.

Regular reviews are essential to staying on track. This includes monitoring the performance of your pension and investments, reassessing your intended retirement age, and checking whether your savings are aligned with your future needs. By doing so, you maintain control and can make informed adjustments as needed.

At TPO, our approach will help you navigate changes with confidence. We aim to provide clarity and flexibility, ensuring your retirement strategy remains robust and responsive throughout your life.

Getting the right advice

While there are many tools and calculators available to help you estimate your retirement needs, the decisions involved can be complex. How to draw down your pension tax efficiently, how to invest in later life, and how to prepare for unexpected costs such as care all involve detailed planning. For those with a moderate to comfortable level of wealth, speaking with a regulated financial adviser can help you avoid costly mistakes and tailor a plan to your specific situation. 

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This article is for information only and does not constitute individual advice. The information provided in this article is based on the current allowances and legislation and is subject to change.

The Financial Conduct Authority (FCA) does not regulate cashflow modelling, trust or tax advice.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available.  

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.