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You’ll need £587k to retire in ‘comfort’! This is how you could do it

We spend plenty of time at The Motley Fool warning of the perils of leaving the government in control of what kind of standard of living you can expect in retirement.

The State Pension may have been hiked last week, but the rate at which benefits rose is far from mind-blowing. Besides, these upcoming rises provide little comfort to those still some way off retirement, who face an uncertain financial fate as the Treasury struggles to balance the books in a time of a rapidly-ageing population.

The cost of comfort: £587k!

Despite our expertise in the area, though, from time to time a study comes out that still has the capacity to shock us. And latest research from the Pensions and Lifetime Savings Association (PLSA) has done just that.

According to the body, an individual will need a whopping pension pot of £587,116 — if they wanted to turn this into an annuity — to provide them with what it describes as a ‘comfortable’ retirement.

The PLSA puts the average cost of such a lifestyle, one that would allow for “more financial freedom and some luxuries,” at £33,000 per year. It says that this would allow a pensioner two holidays per year, a replacement two-year-old car every five years, a weekly shopping bill of £56 and clothes spend of around £125 per month.

For couples, the PLSA estimates the cost of this lifestyle at £47,500 and suggests a person will need to have contributed £355,856 to the pension pot to achieve this.

Lower down the ladder

A whopping sum, I’m sure you’d agree. So what quality of life can those without such a handsome nest egg expect?

The PLSA says in order to achieve a ‘moderate’ lifestyle — in other words “more financial security and flexibility” versus a threadbare standard of living — you’ll need a pension pot of £267,116 as an individual or £125,856 if you’re part of a couple, equating to yearly spend of £20,200 and £29,100 respectively.

This means pensioners could enjoy “one foreign holiday a year and eat out a few times a month” and an individual could spend around £46 per week on groceries and just over £60 a month on clothes. Not great, clearly, but this is positively decadent compared to what the PLSA’s definition of a ‘minimum’ lifestyle involves.

A weekly food shop of just £38, no car, clothes spend of around £38 annually and one or two short holidays in the UK. For this basic lifestyle, costing an estimated £10,200 a year, an individual will need a pension pot of £28,656. The cost for a couple comes to £15,700 but the PLSA says that two people could attain such a lifestyle on just a State Pension.

Get busy!

I don’t know about you but I plan to live a life of luxury when I retire, not scramble together the pennies to achieve just a spartan existence. Fortunately, it’s possible for individuals to do just this, provided they use their money wisely.

Based on the average annual return of 10% that stock investing can generate, someone in their mid-30s who dedicates £285 per month to buying shares can expect to make that £587k target for a ‘comfortable’ retirement by the time they reach the age of 65. Not easy, sure, but with ample time, some decent savings and a little sound advice, it’s still possible to hit that target and enjoy a luxurious lifestyle in retirement.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.