This is the million dollar question! Exactly how much money DO you need to retire? The answer, as you can probably guess, isn’t simple. That’s because it depends on a few things, such as the kind of lifestyle you want to enjoy, whether or not you own your own home mortgage-free, if you are single or in a couple, and how much state pension you are entitled to. 

To help you work out YOUR magic retirement number, let’s start by looking at what the experts say we need. 

How much do Retirement Living Standards say you need?

According to the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards, if you are single when you retire, right now you would need:

• £14,400 a year for a minimum lifestyle
• £31,300 a year for a moderate lifestyle
• £43,100 a year for a comfortable lifestyle

And here’s what they say a couple would need: 

• £22,400 a year for a minimum lifestyle
• £43,100 a year for a moderate lifestyle
• £59,000 a year for a comfortable lifestyle

You can find out how ‘minimum’, ‘moderate’ and ‘comfortable’ lifestyles are defined here. Please bear in mind (as we touch on later) you may not decide that everything they include is important to you.

How much money do you need on top of the State Pension? 

Now let’s look at what you might get as a State Pension, and how much of the money the Retirement Living Standards say you need it covers.

The full new State Pension for the 2025/2026 tax year is £11,973 a year, or £230.25 a week. This means that, if you are single, you’ll currently have a financial gap of:

• £2,427 a year for a minimum lifestyle
• £19,327 a year for a moderate lifestyle
• £31,127 a year for a comfortable lifestyle

And if you are in a couple, your gap would be:

• Nothing for a minimum lifestyle (you’ll have an excess of £1,546 a year)
• £19,154 a year for a moderate lifestyle
• £35,054 a year for a comfortable lifestyle

So now we know what ‘gap’ your private or workplace pension needs to fill, we can start to calculate how much you might need in your pension pot, using the 4% rule.

What is the 4% pension drawdown rule?

In short, the 4% pension drawdown rule means if you withdraw 4% from your pension pot annually, and increase this each year by the rate of inflation, your money should last you over a 30-year period.

To give you an idea of what this means in real terms, if you have a £100,000 defined contribution pension, you could have a starting income of £4,000 a year, or £333 a month, if you withdraw 4% each year. 

If you have a pot of £200,000 you could achieve an initial income of £8,000 a year, or £667 a month, if you withdraw 4%, and if you have £300,000, you could live on an initial annual income of £12,000, or £1,000 a month.

How much do you need to save for a retirement income of £20,000 a year?

But what do you need to save if you want to boost your State Pension to reach a ‘moderate lifestyle’? If you are single you’d need to fill a gap of £19,327 a year, and if you are in a couple, you’d need to find £19,154.

Using the 4% rule, this means you’d need a pension pot of around £500,000. This would mean you could withdraw £20,000 in the first year of your retirement. Then, if inflation is 2% in that year, the following year you’d withdraw £20,400.  

In order to save a pension pot of this size, you would need to contribute around £520 a month if you are in your 40s, and £910 a month if you are in your 50s.

Make your OWN retirement budget

Don’t panic if this feels desperately out of reach. Even investing relatively small amounts in your 50s can make a difference to your retirement, thanks to compound interest. 

And remember that the Retirement Living Standards are based on assumptions about how much people might need for shopping, socialising, holidays, transport, home improvements, etc. These might not be typical for you, and you may be able to live very happily on less than they estimate you’d need. 

What we always recommend doing is working out your own retirement budget. This is based on when you want to retire, the kind of lifestyle you want to live, where you are happy to compromise, and where you can cut back. 

Start by making a list of the things that are non-negotiable for you, and the nice-to-haves if you can afford them, then make a budget. Don’t forget to include utilities, council tax etc to get a realistic monthly figure, with extras for things like Christmas, birthdays and any holidays or special occasions you want to celebrate. 

This will give you a realistic idea of how much you will need to live on when you retire. From this, you can then start to calculate how much money you will need annually, and what size retirement pot you will need to fund it. And remember: a personal, workplace or State Pension isn’t the only way you can fund retirement. You may also have a rental property, savings or choose to work part-time. 

The important thing is to identify what will make you happy when you retire, and find a way to ensure you consistently have enough money to cover it.