Here’s how much income you need for a comfortable retirement: the State Pension isn’t enough!

The State Pension isn’t enough for a single person to live even a basic lifestyle in retirement, according to new research.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One of the most challenging aspects of retirement planning is working out how much income you’ll actually need. Ultimately, it comes down to what type of lifestyle you’re planning to live in your later years and whether you’re planning to live frugally, or live it up.

To help those retirement planners determine post-work income requirements, the Pensions and Lifetime Savings Association (PLSA) has put together a new set of ‘retirement living standards’, which details roughly how much money you need per year for different retirement lifestyles. Here’s a look at how much annual income the trade association believes is needed.

Single person income requirements

The PLSA believes that in order to live a ‘minimum’ lifestyle, a single person requires income of around £10,200 per year. This would cover all basic needs, with some money left over for ‘fun’, apparently.

However, if that person wanted to live a ‘moderate’ lifestyle, they’d need nearly twice that – £20,200 per year. This kind of lifestyle would provide more flexibility. To actually live a ‘comfortable’ lifestyle, a single person would require annual income of around £33,000. This would provide for luxuries such as multiple trips to Europe each year.

Source: The Pensions and Lifetime Savings Association

Couple income requirements

For couples, retirement income requirements are different because costs can be shared. Here, the PLSA believes that to live a minimum lifestyle, a couple need income of around £15,700 per year while, for a moderate or comfortable lifestyle, £29,100 and £47,500 is required, respectively.

Source: The Pensions and Lifetime Savings Association

So, what are the takeaways here?

The State Pension isn’t enough

One key takeaway is the State Pension isn’t enough to provide a single person with even a minimum lifestyle. At £8,767 per year currently, it’s well short of the £10,200 that’s needed to live a basic lifestyle as a single person.

If a couple were both entitled to the State Pension and were receiving £17,534 in income per year from the government, they may be able to get by. That’s more than the £15,700 annual income that the PLSA says is required for a couple to live a basic lifestyle. However, if that couple wanted to live a moderate lifestyle, the State Pension would be very much inadequate – the couple would need nearly 70% more income.

Act now before it’s too late 

Overall, these new retirement living standards are a reminder of just how important it is to plan and save for retirement. In most situations, the State Pension will not be enough to live a comfortable lifestyle. As such, it’s crucial to think about your retirement income needs ahead of time and start building up a retirement pot as early as possible. The sooner you start saving for retirement, the more chance you’ll have of living a comfortable lifestyle in your later years.

If you’re looking to learn more about saving and investing for retirement, you’ve come to the right place.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Retirement Articles

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

2 UK shares that could help set up a SIPP for decades!

Our writer explains the long-term appeal he sees in one British share he already owns in his SIPP -- and…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Here’s how I’m aiming to become a Stocks and Shares ISA millionaire!

I'm confident that a regular investment in FTSE 100 and FTSE 250 shares could supercharge the size of my Stocks…

Read more »

Investing Articles

3 top tactics that ISA millionaires use to strike it rich!

Ever wondered how ISA millionaires manage to make such enormous wealth? Here, Royston Wild divulges some of their greatest strategies.

Read more »

Investing Articles

Can a Stocks and Shares ISA help me retire early?

This Fool is confident that using his Stocks and Shares ISA will allow him to give up work early. Here…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Cash vs Stocks and Shares ISAs: here’s where I’m investing in 2024!

Cash and Stocks and Shares ISAs are both excellent products for the modern saver and investor. But which is the…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how I try to find brilliant shares for my SIPP

Christopher Ruane shares the approach he takes when hunting for shares to buy and hold in his SIPP as he…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

3 FTSE 100 and FTSE 250 stocks I’d buy to target a £31,188 passive income!

Royston Wild explains how a regular monthly investment in FTSE 350 stocks could be the key to long-term wealth creation.

Read more »

Investing Articles

How I’d try to turn a small ISA into £1,000,000 with this savings trick!

Regular investment in a tax-efficient Stocks and Shares ISA could be an effective way to build long-term wealth. It could…

Read more »