Your retirement planning guide: How much do you need to retire at 60?

While early retirement may seem like a pipe dream in the modern world, it is still a possibility for those who plan ahead. But how much money do you need to save to make that dream become a reality in the UK? In this early retirement guide, we will outline all the steps you need to take to enjoy the prime years of your life away from the working world.

They say there are two chances in life to explore the world with ultimate freedom – before you start work, and once you retire. So why not make your retirement years as rich and expansive as possible? Spend some more time with your families! Take up those hobbies you have always had itching away in the back of your mind! Book a flight and start ticking off your travel bucket list! Whatever retirement looks like for you, we are here to help you make it become a reality with your very own personalised retirement plan.

• How much do I need to save to comfortably retire at 60?
• How much should be in my pension pot by age 60?
• How much income will I receive from my pension?
• What steps should I be taking now to make early retirement a possibility?

Let’s dive into our early retirement guide to answer all of your most pressing questions.

How much should be in my pension pot by age 60?

If you find yourself asking this question, then you are definitely thinking along the right lines. Once you exit the working world, pensions become your main source of income to get you through the retirement years. So, what is a good pension pot at age 60 in the UK? Let’s take a look at the numbers.

The average pension pot in the UK stands at £50,000. However, we appreciate that pensions are completely unique to each individual, so working from an average is rarely helpful. Instead of asking yourself ‘What is a good pension pot at 60?’ try asking yourself ‘What do I want to use my pension pot for in my retirement?’

A pension pot is not defined by the overall amount sitting within it – a pension pot is defined by whether it can accommodate your retirement plans or not. Some people dream of exploring the world, and that might be a little more expensive than taking the grandkids to the park for ice cream, for example. Therefore, it is important to consider the following things:

• What do I want to do in my retirement? How much will it cost?
• What other income sources will I have? (State pension or final salary pensions)
• What do I have in my pension pot? Will it comfortably cover that lifestyle?
• What other savings or investments do I have?
• What outgoing costs will I have during my retirement years?

Don’t be afraid to dive into Excel and make yourself a spreadsheet. Numbers and planning are your friends when it comes to a financial retirement plan.

How much do I need to retire at 60 in UK?

We’ve already covered that retirement plans and pension pots are entirely personal and unique to the individual, but it can still be helpful to have some numbers to aim for. The general rule is that you should aim to accumulate between 20 and 25 times your expected annual retirement expenses.

For example, if you expect to spend £30,000 per year in your retirement, then you will need between £600,000 and £750,000 across your pension pot, investments, and savings. Alternatively, if you expect to spend £50,000 per year, you will need between £1,000,000 and £1,250,000.

Remember, your pension pot may not be your only source of income in your retirement years. If you have a state pension or final salary pension, then you should include those figures in your planning. If you own any properties and collect rent, then you can also factor that in.

For example, if you expect to spend £50,000 per year in your retirement but collect £10,000 from your state pension and £12,000 from a rental property, then you will only actually need £28,000 per year from your pension pot, savings, and investments. That drops your total figure down from £1,000,000-£1,250,000 to £560,000-£700,000.

Do you want to understand your own numbers? Do you need a personalised plan? Book an expert retirement consultation call with us here – https://fairviewifa.co.uk/booking/

How much income do I need to retire?

The income you need per year in your retirement years depends entirely on the amount you expect to spend. The aim of the game is to keep your income and savings above your outgoings. That being said, the Retirement Living Standards do provide us with some helpful estimates to work from. The average retired UK couple requires:

• Basic Retirement: £22,400 per year
• Moderate Retirement: £43,100 per year
• Comfortable retirement: £59,000 per year

Remember what we said before though. Averages are averages – you are your own unique person with your own specific situation. Therefore, it makes sense to work out your own estimates and figures for your retirement.

1. What is your income likely to be?
2. What do you have in savings, pension, and investments?
3. How much are you likely to spend?

If you’re asking “how much pension pot do I need for £2000 per month?” then it’s important to put some context around it. This may be too little, just right or even more than what you need. It’s key to factor in your own individual circumstances in terms of what else you will have coming in, and your other financial commitments.

You can learn a lot about what you will spend in retirement by simply looking at what you spend today. Have a look at the last few months of your bank statements. How much did you bring in and how much did you spend? For example, if you earn £4,000 per month and finish the month with around £1,000, your outgoings should be around £3,000. That gives you a good base figure to work from. However, there are more things to think about. Most importantly, how will your life change once you retire?

• Do you plan on splashing out on any new purchases?
• Will you be spending more on travel, hotels, holidays, etc?
• Will you socialise more – meals, entertainment, experiences?
• Will you save money on commuting to work?

Once again, it can be helpful to get that spreadsheet out, put in the numbers, and work out some rough estimates. Alternatively, you can book an expert retirement consultation call with us here – https://fairviewifa.co.uk/booking/ and we will take you through all the steps.

Where will my retirement income come from?

Your retirement income can be split into two main categories…

• Income

Retirement income = the money paid into your bank account each month. For example, state pension, final salary pension, rental income, savings interest, dividends, and more.

Remember – even if you want to retire at 60, you may find that your state pension and final salary pension do not kick in until later in your 60s.

• Capital

Capital = money you have saved throughout your life. For example, your pension pot, investments, and savings.

You can withdraw from these capital sources every year to boost your retirement income. However, you should work out how much you are able to withdraw each year while still leaving yourself enough for your entire retirement.

How to create a retirement income plan

Creating a retirement income plan may sound tricky, but it is actually very simple. All you have to do is add your expected income to your expected capital and that gives you a basic retirement plan figure to work from. Of course, this is just a rough estimate because it will not include one-off expenses, unexpected costs, and taxes.

Do you need help creating your retirement income plan? Book an expert retirement consultation call with us here – https://fairviewifa.co.uk/booking/

What if I don’t have enough to retire at 60?

The most important thing to remember is – do not panic. There are always changes you can make to boost your retirement timeline. The one mistake you should always avoid is retiring too soon when you are not financially stable enough to do so. In order to increase that retirement fund, you should:

• Try to put away more savings per year
• Reduce your monthly spending
• Look to improve your investments
• Take an early final salary pension
• Push your retirement back a few years to ensure you are financially ready

Do you want to understand your own numbers? Do you need a personalised plan? Book an expert retirement consultation call with us here – https://fairviewifa.co.uk/booking/

What is better – Annuity or Drawdown?

When planning for retirement, many people end up asking themselves the same question – what is better, annuity or drawdown?

• Annuity

Annuity gives you a guaranteed income for the rest of your life. Therefore, the main selling point of an annuity is security and consistency. You can either get a fixed-rate annuity or one that increases with inflation. The downside to an annuity is that it usually means a lower annual income. That is the price of the security and consistency you receive.

• Drawdown

A flexible drawdown means your pension remains invested. This means you can withdraw when you want, have full control, and can remain flexible. The downside is that you risk running out if you withdraw too much too soon.

Annuity vs Drawdown

The best option really depends on your unique situation. If you need security and a guaranteed income, then annuity is likely your best option. But if you already have enough income to cover the necessities, drawdown may offer you more control and flexibility. Remember, you can always use a mixture of both to suit your needs too.

Do you want to understand more about annuity vs drawdown? Book an expert retirement consultation call with us here – https://fairviewifa.co.uk/booking/