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How much money do I need for retirement?

It's tricky to know how much money you need stashed away to retire and live a lifestyle you're happy with. 

While the amount will vary from person to person, we've put together some rough estimates of how much you need to retire, as well as the question you should be asking to help achieve a good income in retirement.  

How much money do I need for retirement?

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How much annual income do I need to retire? 

There's no such thing as a minimum retirement income, and how much you'll need to budget will depend greatly on your unique lifestyle. Someone who plans to travel the world in retirement and eat out regularly will need more money than a retiree who enjoys cooking at home and exploring their local countryside.  

To give people an idea about how much income they might need in retirement, Which? has done some of the sums already, which account for three different levels of lifestyle. We can't stress enough that these are rough estimates, but they should give you an idea about what you should be aiming for.  

To fund a basic lifestyle, where all the essentials like groceries and bills are covered but there's very little budget for even the simplest of staycations, you'll need an income of roughly £13,000 per year for a single person. If you're living with someone else, you'll need to bring in £18,000 between you.  

If you'd prefer a 'comfortable' lifestyle, which gives you a little extra for foreign breaks, leisure activities and the odd drink or two, you'll need £19,000, or £26,000 per year for two. And to fund a luxury retirement, where you're free to embark on long-haul trips, purchase new cars and live life to the fullest, you'll need £31,000 for one or £41,000 for a couple. 

How can I work out my retirement income budget? 

Here are some questions to ask yourself or discuss with your financial advisor: 

  • What is the minimum income I need to cover my outgoings? Consider everything from your mortgage/rent payments and utility bills (which are likely to go up if you're spending more time at home) to transport and grocery shopping. These are the absolute basics that you need to be able to comfortably cover in retirement.  

  • How much would I like to be able to spend on non-essentials? Whether you want to travel, indulge in eating out a bit more or take the grandchildren for days out, it's important to plan for non-essential spending too.  

  • Am I entitled to state benefits? As long as you've made 35 years of National Insurance (NI) contributions (either through work or by claiming certain benefits), you'll be entitled to claim a state pension from the age of 66. The maximum amount you can receive is £179.60 per week, adding up to £9,339.20 a year per person – far below even the essential level of income if it's your way to fund retirement.  

  • How much am I saving, or can I save towards retirement? It's best to start saving for retirement as early as you can. Whether you've already started or want to begin building up your pension pots, tools like Unbiased's pension calculator work out how far your money will go.  

If you'd like more information on when you may be able to retire, check out our previous article on retirement age.  

How much should my pension pot be worth? 

This is a very personal question that will depend on the lifestyle you'd like to have in retirement. The sum will also depend on what you're planning on doing with it. For example, you could save a smaller initial amount and siphon it off slowly using pension drawdown, allowing the fund to continue growing (though this is never guaranteed, as with any investment). Or you could purchase a pricier, but guaranteed, annuity, which will give you a set income every year.  

Using Which?'s estimates, you would currently need to have a pension pot worth £757,000 to buy an income that gives you £41,000 a year. By comparison, you could enjoy the same lifestyle through income drawdown with just £442,020 saved – but this is a riskier option with no guaranteed income at all.  

Learn more: how long will my pension last?

What are my retirement income options? 

You need to understand your options well in advance of your retirement. There isn't a one-size-fits-all solution, and it's important you chat your plan through with an accountant or independent financial advisor before taking any action that could put your money at risk.  Here are some of the most common options worth discussing with a professional: 

  • Pension drawdown – Drawdown allows you to regularly withdraw income from your pension while allowing the rest of your fund to grow through investment. It's a comparatively low-risk investment strategy, but there will always be a level of risk, meaning you could lose everything if the stock market turns against you.  

  • Annuities – This is an insurance product that guarantees you a certain income every year for the rest of your life. The price will vary depending on your current health, how old you are when you take it out and how much income you'd like to receive. It's a safe, reliable option but won't give your money the chance to continue earning interest or growing through investment.  

  • Withdrawing a lump sum – Some pensioners prefer to take a lump sum, which you can do from 55. They might choose to pay off their mortgage, reduce their outgoings, or gift their children for a house deposit. You can take up to 25% of your pension tax-free, leaving the rest to continue growing or to go towards an annuity at a later date. 

Defined benefit vs defined contribution pensions 

One key thing to understand is whether the pension(s) you contribute to are defined benefit (DB) or defined contribution (DC). DB, or final salary, is rare nowadays and generally only offered by large public sector employers. It guarantees you a set income for the entirety of your retirement, which is either based on the average amount you've earned over your career or the salary you were earning just before retirement.  

If you have a defined benefit pension, you won't be given an option to cash it in. That's because you've essentially already purchased a 'benefit' with the money that's gone into the fund, rather than having a pension that acts as a long-term savings account. Instead, you'll receive a set amount of income.  

Most private and workplace pensions now fall into the DC category, where you pay into a pension pot and can use it to buy an annuity, reinvest or siphon off through drawdown throughout your retirement.  

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How much do I need to semi-retire? 

Semi-retirement is a sensible stepping stone for many people who aren't quite ready to fully retire yet, either mentally or financially. You'll be able to adjust to having more free time gradually and can supplement your state and private pension income with a salary.  

Before you rush into semi-retirement, you need to be sure it's a realistic prospect. If you resign from your job without considering frustrating hurdles, like the fact that candidates over 40 are 50% less likely to get a job offer, you could be on the road to serious financial difficulty.  

If you're aiming for a comfortable income and live alone, you'll need to make sure the amount you can claim from state or private pensions (or both) and what you earn adds up to around £19,000.  

Part-time or reduced working hours 

Some workplaces will allow older staff to reduce their hours, either through job sharing (where one full-time role is covered by two part-time staff, with the salary being distributed pro-rata) or by moving into a similar part-time role. For example, skilled professionals could move into consultancy or work on a freelance basis, giving them control over their free time every week.  

If that's not possible, some people choose to take on a new part-time role instead. Secure a new job before leaving your current position, especially if you cannot afford to completely retire, to make sure you'll remain financially comfortable.  

Remember – every year you're retired means another year without contributing to your pot and another depleting the funds you've worked so hard to build up. Don't leap unless you're sure there's the safety net of another role waiting.  


Volunteering is a great option if you're financially comfortable but worry about having nothing to do in your retirement. Volunteering is unpaid, meaning it won't do anything to supplement your retirement income. However, you might enjoy non-monetary perks in your role that happen to reduce your outgoings a little. If you're volunteering with a local school or community project, you could be offered free refreshments or transport.  

And if your volunteering activity is something you'd happily pay to do as a hobby, or if you choose to volunteer abroad, you could save money on membership fees and some of your travel costs, such as accommodation. 

Using investments to fund retirement 

You may also be able to semi-retire thanks to relatively reliable returns from assets such as property. It's a great option if you're not eligible for or don't want to claim your pension yet or want to give up work completely without dipping into your retirement fund too much.  

Not sure what the right option is for you? Find an accountant or financial advisor you can trust by using Unbiased's handy search tool.  


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About the author
Kate has written for leading publications and blue chip companies over the last 20 years.