How much does a couple need to retire? Building an estimate of what you and your partner need to live comfortably after retirement can be difficult, mainly because it depends on several factors. You’ll need to consider the standard of living you’re used to, your age when you retire and how much income you’re likely to need to cover your expenses.
The average retired couple living in the UK has a weekly income of around £576 (£29,952 annually), and about 20% of all retirees have an income of £936 (£48,672 annually), based on figures from the Department for Work and Pensions1.
And there’s more
Research has shown how much does a married couple need to retire is around £18,000 a year to pay for their essentials in retirement. To afford luxuries such as holidays, their income needs rise to £26,000.
This means you’ll need a defined contribution pot worth £210,000 alongside your state pension of £26,000.
Try these three tips to increase your pension pot and ensure you and your partner have sufficient income during your retirement.
Define Your Income Goals
If you don’t know how much you will need to live comfortably in your retirement, try using a pension calculator to work it out. These online tools allow you to input your desired joint monthly income, along with your age and the age you aim to retire and will tell you how much you need to save each month, over what timeframe. You can even add in the savings you have to date to get a better idea of how much you still need to save.
If you find that you both need to make a considerable contribution each month, you can adjust the amount to something more manageable. You might have to delay your retirement slightly to achieve the income you want if you are unable to afford large contributions now.
Contribute To Your Pension Pot
Even though you and your partner are likely to share your combined pension incomes, it’s always a good idea to build your own pension while you’re still employed.
This can help prevent a pension savings gap between you and your spouse in future and can ensure you have enough put away to provide you with your own income should your circumstances change.
So here’s the trick
The savings you can manage will depend on your wage and financial responsibilities, but it’s a good idea to put away as much as possible. If you make more significant contributions to your pension scheme, you will benefit from more government tax relief programmes.
If you’re part of a workplace scheme, your employer will also contribute to your pension. Often, employers will be willing to match contributions, meaning the more you put away, the more your employer will chip in.
And finally, combine any old pensions you may have from previous employers into one combined pension plan. This will make it easier to manage your funds and will prevent smaller pots being swallowed up by fees.
Get The Most From Your State Pension
The state pension2 may be too little for you to keep the lifestyle you’re used to after retirement but is it a handy way to supplement your retirement income. Your National Insurance contributions determine your state pension, and you’ll need to have contributed for 35 years to be eligible to a full state pension.
If you’ve taken a break during your career due to illness or to care for your family, you could be eligible to claim National Insurance Credits. Look into your National Insurance record as soon as you can to make sure your contributions are on track.
A Few Common Questions
The pension gap refers to the disparity in savings accumulated between men and women, during their careers, for their retirement. Research has shown than men are able to save significantly more than women for their pension pots. This could leave women under financial strain later in life.
Your pension savings will provide you with a form of income after your retirement. These savings could be used to boost your income in the case of unforeseen costs. Pension schemes are often effective forms of saving because you can access tax relief and employer contribution benefits.
The exact amount needed for each individual will depend on their income and circumstances, but you should aim to have as much as possible in your pension fund. The general rule of thumb is that you should have 70% of your working income available for your retirement years, or that you should save between 10 and 15% of your salary.
A private pension is a fund you save towards in your own capacity, or with through your workplace. This fund is built up from contributions made by you or by your employer. The state pension is provided by the government, and the amount you will receive is based on your National Insurance contribution history.
The dream of growing old together starts at retirement – but to have the life of your dreams, you’ll need to have a decent-sized income for your retirement years. Following these simple steps can ensure you and your partner have the funds to enjoy your golden years.