Can I afford to retire?

• Savings and investments: The income generated from your pensions, savings, and investments.
• Debts and obligations: Any outstanding debts or financial obligations that will continue into retirement.
• Unexpected costs: Health issues or emergencies that might arise.

Average retirement income in the UK

According to the Pensions and Lifetime Savings Association (PLSA), retirement income targets have been categorised into three different levels based on the kind of lifestyle people might want:

• Minimum: Covers all essential needs but with little room for luxuries. This includes basic living costs, minimal travel, and social activities.
• Moderate: Allows for more financial flexibility, occasional holidays in Europe, and more frequent social activities.
• Comfortable: Provides for a more affluent lifestyle, including long-haul holidays, more spending on leisure activities, and a higher standard of living.

As of the latest figures:

• Minimum: Single retiree – around £14,400 per year. Couple – around £22,400 per year.
• Moderate: Single retiree – around £31,300 per year. Couple – around £43,100 per year.
• Comfortable: Single retiree – around £43,100 per year. Couple – around £59,000 per year.

These figures include all sources of income, including the State Pension.

The State Pension

The UK State Pension forms the backbone of retirement income for many. As of 2024-25, the full new State Pension is £11,500 per year. This can be supplemented by additional savings, private pensions, and other investments.

Private and workplace pensions

Most people will have some form of private or workplace pension. The income from these can vary significantly based on how much has been saved, the performance of the investments, and the type of pension plan.

• Defined benefit pensions: These offer a guaranteed income for life based on your salary and years of service.
• Defined contribution pensions: The income depends on how much you and your employer have contributed and how well these contributions have been invested.

Additional income sources

• Savings and investments: ISAs, savings accounts, bonds, and other investments can provide additional income.
• Property: Rental income from property investments or downsizing to free up equity.
• Part-time work: Many retirees choose to continue working part-time to boost their income and stay active.

How to plan for a good retirement income

• Start early: The earlier you start saving for retirement, the more you can benefit from compound interest.
• Maximise contributions: Take full advantage of employer pension contributions and consider making additional voluntary contributions.
• Diversify investments: Don’t put all your eggs in one basket. Diversifying your investments can help spread risk.
• Keep an eye on fees: High fees can eat into your savings. Opt for low-cost investment options when possible.
• Review regularly: Regularly review your retirement plan and adjust as necessary to ensure you’re on track to meet your goals.
• Consider professional advice: Financial advisors can help tailor a retirement plan to your specific needs and goals.

Realistic lifestyle adjustments

Retirement can bring changes in lifestyle, and planning for these can help manage your finances better:

• Downsizing: Moving to a smaller home can reduce maintenance costs and free up capital. The majority of our residents who move into ExtraCare’s retirement communities are downsizing for various reasons.
• Relocating: Consider moving to areas with a lower cost of living.
• Budgeting: Create a realistic budget that aligns with your retirement income and stick to it.

Health and wellbeing

A significant part of a good retirement is maintaining good health and wellbeing:

• Stay active: Engage in physical activities to stay fit and healthy.
• Social connections: Maintain social connections to avoid loneliness and keep your mental health in check.
• Healthcare planning: Plan for potential healthcare costs and consider health insurance if needed.

At ExtraCare we are passionate about our residents living better for longer, and heavily encourage physical activity and building social connections. Many of our locations have gyms and classes that not only keep residents fit and healthy, but also help build the community spirit.

To conclude, a “comfortable” retirement income in the UK varies from person to person but generally falls within the range provided by the PLSA’s categories. It’s crucial to start planning early, maximise savings, diversify investments, and regularly review your financial plan.

Remember, a fulfilling retirement is not just about having enough money but also about maintaining good health and an active, engaged lifestyle. By carefully planning and considering your options, you can ensure a comfortable and enjoyable retirement.