To arrive at our new retirement income targets, we surveyed more than 5,200 retirees in March 2023 about their spending habits.
Here's what the findings tell us about how much you should aim to save for the lifestyle you want in retirement.
Which? retirement income targets
Our survey found that people living alone spend an average of £13,000 a year on day-to-day essentials, including food and drink, transport and utility bills. The equivalent figure for couples is £19,000.
Spending rises to £20,000 (£28,000 for couples) when you include some leisure spending, and £32,000 (£44,000 for couples) to include luxuries such as extended long-haul holidays.
While the targets for single retirees might seem high compared with couples, this reflects the fact that many costs – notably council tax, energy bills and insurance premiums – remain virtually the same even if you live alone.
What are these income targets based on?
To get a detailed understanding of retired households' spending habits, we've carried out an annual survey of retired Which? members since 2015.
We ask about their monthly expenditure in different areas, then by grouping these spending categories together, we've put a figure on the annual amount needed to achieve three different standards of living in retirement:
Our 'essential' income targetOur 'comfortable' income targetOur 'luxury' income targetHalf of retirees surveyed told us they felt their financial situation had worsened over the past three years, with a third saying they'd cut back on their spending in the past six months.
How much will you need to save in total?
Our targets are designed to give you a better idea of how much you might need to spend each year in retirement. The next step is working out how much you'll need to save in your private pensions to generate the income you want.
Meanwhile, couples would need to aim for a combined pot of around £115,000 if opting for drawdown, or £131,000 if buying a joint-life annuity.
If aiming for our luxury retirement target of £32,000 a year (£44,000 for couples), you'd need a total pot worth at least £400,000 - or £420,000 for couples.
The reason some of these figures are higher for retirees living alone is that they spend proportionately more, while having half the state pension entitlement and tax-free allowance.
Find out more:What about the state pension?
The state pension alone isn't enough for a comfortable retirement, based on our targets, but it will help to get you some of the way there.
You'll pay tax on any pension income you receive, if this takes you above the tax-free personal allowance (£12,570 in 2023-24). This is taken into account in our calculations.
Find out more:source https://www.which.co.uk/news/article/the-price-of-a-comfortable-retirement-20000-a-year-which-research-reveals-aNKPz6x07swU