Pension Planning

How Much Do I Need Saved Before I Retire?

Saving for retirement is one of the most important things we can do. As the day draws nearer, we might worry if we have enough put aside.

Here, we look to address those worries and address how much you should have saved by retirement age. We’ll also explain why and briefly outline some ways to help you reach your target.

 - 5 Min Read
Last updated and fact checked:
How Much Do I Need Saved Before I Retire?
Editorial Note: We earn a commission from partner links on Pension Times. Commissions do not affect our writers’ or editors’ opinions or evaluations. Read our full affiliate disclosure here.

Saving for retirement is one of the most important things we can do. As the day draws nearer, we might worry if we have enough put aside.

Here, we look to address those worries and address how much you should have saved by retirement age. We’ll also explain why and briefly outline some ways to help you reach your target.

Maximise your retirement fund with our panel of pension providers. Click on your chosen provider to get started!

How Much Money do you Need to Retire at 65?

The amount of money we need to save before retirement is different for everyone. There are so many variables in a person’s life that materially affects how much money they will need for the future. These variables include lifestyle choices and how long you expect to live.

Devise a Retirement Budget

You first need to calculate a savings figure based on your projected outgoings and how long you expect to live. While it is difficult to know the latter for sure, you can calculate a figure that you will spend annually in retirement with a little planning. This means you need to try to work out how much you will spend each year.

While this can sound daunting, simply approach your estimations logically as well as bringing in the help of a financial planner who can help you create a retirement budget. In this retirement budgeting process, you will need to include everything you can think of that will be a future cost you may incur. You must be honest throughout your planning about what your projected expenses will be. You need to think about what you spend on everything from food to utility bills, from accommodation costs to holidays.

Think About How You Will Spend Money

Plus, you need to remember that how you spend money will likely materially change in retirement. While you may not have any work expenses anymore, you will spend more on leisure activities. Additionally, while it is a rather bleak prospect, you need to factor in that the need for some form of healthcare is likely. You may need to go into a nursing home or have some sort of home help. Costs for this type of healthcare can add up quickly so you need to produce a realistic plan of how you will afford this. Do you have health insurance that you can draw on? Or will you be relying on releasing equity from your home?

Where Are Your Savings?

Once you have done this, you will have an estimate of how much you need each year in the form of income. However, before you match this up with what you already have put aside, it is essential to understand where your income will come from.

For most of us, income will come from the following:

It is imperative to know the differences between those incomes, as some may fluctuate. At the same time, some, like the state pension, will be secure. There are also tax implications on those different types of income.

Does Your Income Cover Your Budget, or is There a Shortfall?

When you have ascertained how much total income you will get from your different sources, you need to match that up with your pension budget.

If there is a shortfall, you need to address where and how you will cover it. You could choose to make savings from your retirement budget, or you could work a few years longer to pay into pension pots that you can draw income from in future. Also, you can choose to defer any pensions you have - state or private - which helps grow your pot of money into something bigger for future use. For example, your state pension will increase by 1% for each nine-week block that you choose to defer. This can go up to 5.8% if you decide to defer it by a whole year.

Also, remember that you are entitled to pension tax relief if you meet the criteria set by the government. This means you can receive tax relief on private pension contributions on up to 100% of your annual income. You should get tax relief already if your rate of Income Tax is 20% as your pension provider will add your tax relief to your pension pot. Or, if you are in a workplace pension that you contribute to, your employer will deduct your contribution before deducting income tax from your wages. In all, this tax relief can help you save towards your retirement if the day is nearing and you have not yet met your savings target.

Don’t Forget Inflation

Finally, it is also vital to remember inflation will have a direct impact on what your savings now can buy in the future. You will need to work out an inflation-adjusted figure for your budget to ensure you can still reach the standard of living you are aiming for in retirement. If you are nearing your retirement age now, inflation won’t be such an overarching issue for you, but it is still important to keep in mind.

Saving for Retirement - The Bottom Line

If you find out after your calculations that you have enough to retire on at your chosen retirement age, then that’s great - congratulations! However, many of us may find that we are a little lacking in funds. This can be a disheartening conclusion to come to but remember that you have taken a positive step in calculating your needs in the first place. It is only when you have realised you may have a shortfall that you can start to do anything about it.

And remember small changes can add up to a big difference, especially if you make them early enough.

The content on is provided for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, you should consult a financial adviser that is registered with the Financial Conduct Authority. Any references to products, offers, rates, and services from third parties or those advertised are served by those third parties and are subject to change. We may have financial relationships with some of the companies mentioned on this website. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors. We are not regulated by the Financial Conduct Authority to provide advice, to act as an authorised introducer, or to otherwise sell any financial services or products. However, we endeavour to only link to and highlight brands that are authorised and regulated by the Financial Conduct Authority and/or the Prudential Regulation Authority, and where your money will be protected by the Financial Services Compensation Scheme should you choose to buy a product or service from that particular brand.
See More