Financial experts are always telling us to save as much money as possible for retirement. Yet, in reality, many British adults don’t save anything for retirement at all throughout their careers. They’re under the impression that the State Pension will provide enough money for them to get by, once they’ve finished working.
But can you actually survive on the State Pension alone in your retirement years? Is it enough money for a comfortable retirement, or will you be eating beans on toast every night? Let’s look at how much the State Pension actually is and compare that to how much money people generally spend in retirement.
£10,000 for a basic lifestyle
Currently, the State Pension is just £164.35 per week, which equates to £8,546 per year. Is that enough for a basic lifestyle?
Possibly not, according to recent research from the Joseph Rowntree Foundation (JRF), a respected charity. After surveying members of the public on retirement spending, JRF calculated that the income needed for a single retired person to live a minimum acceptable standard of living (more than just housing and food) is around £10,000 per year.
According to JRF’s calculations, £10,000 will provide enough money for a basic lifestyle that includes things like a mobile phone, internet access, alcohol, presents for grandchildren and a week’s holiday in the UK per year. However, the £10,000 figure also assumes that the individual uses public transport only, spends less than £20 per month at restaurants and has no luxuries such as pay TV or a dishwasher.
While this £10,000 figure is just a guide, the research suggests that, realistically, trying to survive on the State Pension alone could be an uphill battle. Once essential expenses such as food, healthcare costs, transport, and household bills are taken care of, there’s unlikely to be much left over to spend on non-essential expenses such as entertainment, new clothes, or holidays. Were you planning to catch up with friends at the pub every week in retirement? If you’re living off the State Pension you can forget it. Planning to spend two weeks in Spain in July every year? No chance. Retirement on the State Pension may not be what you thought it would be.
It’s never too late to start saving
If the thought of trying to get by on £164.35 per week scares you, it’s probably a good idea to do something about it… sooner, rather than later.
No matter your age, it’s never too late to start saving into a pension or an ISA for your retirement. Even just a small contribution of £50 or £100 per month could make a big impact on your retirement savings in the long run. It could be the difference between counting your pennies every week for the next 30 years and living a more relaxing, enjoyable lifestyle. Be disciplined about saving and investing for retirement now, and you may be able to enjoy your golden years as you imagined them.