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How much do I need to retire?

Ed Monk

Ed Monk - Fidelity Personal Investing

Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

In this article:

You’ve been working and saving for years - but when will it be enough to actually give up full-time work and retire?

It’s a tough question, and one that’s not only asked by older people but by many younger workers too. What you really need to know is how much you need to save, and by when. If you know these things you can begin to get your finances fit for retirement.

Further down we’ll show you how to do that but, if you want a quick answer, Fidelity’s research found that UK households who manage to save seven times their annual household income by the age of 68 should be able to retire and maintain a similar standard of living as in their working life.1 This assumes that the household will include two people, both of whom are entitled to a full state pension.

While a goal of seven may sound challenging, the key is to start as early as possible and aim to meet a series of savings milestones along the way. Our analysis suggests UK households aim to have at least one times their annual income by the age of 30.2 Here’s a further breakdown by age.

Age Income multiple
30 x1
40 x2
50 x4
60 x6
68 x7
How much income do you need to live in retirement?

To plan your retirement target more precisely, this is the first question to answer. The reality is that you are likely to have less income to live from in retirement than in your working life. But the good news is that your living costs are likely to be lower as well.

With some luck you will have cleared any debts by the time you stop working, including having no mortgage to pay. Children will be grown up and should now need less financial support and there’s some tax advantages - no National Insurance to pay after you reach your State Pension Age, for example - and social security entitlements which means you can keep more of your money.

And remember - when you are working a proportion of your salary may be taken up by savings contributions, whether into a pension or elsewhere. These can be reduced or stopped in retirement.

It’s sometimes said that you’ll need a retirement income that is two-thirds of your pre-retirement income to maintain your standard of living. This is a good goal to have in mind but will be tough for many to reach. Trimming some spending may well be necessary.

It can be helpful to work out what your costs in retirement may be. Use a tool like Fidelity’s Retirement Calculator. It lets you enter amounts you think you’ll spend on various essential and non-essential items, like food, holidays, car running costs and entertainment.

It’s a simple tool but useful in giving you a cash estimate of the income you may need each year.

MoneyTalk podcast: The Fidelity team on their own hopes for retirement

Today on the show we’re hoping to answer one of the most fundamental financial questions any of us will have - how much do I need to give up work and retire?

We’re all used to being told that we need to save, and often that what we are saving is not enough, but what does it really take to build a comfortable retirement, and what kind of income should you realistically expect once you’re no longer working?

How much state pension will you get - and when?

Most people will be able to rely on the State Pension to provide some of their retirement income. The current full State Pension income is £175.20 a week and this is hugely valuable because the income is guaranteed and will rise broadly in line with the cost of living. That means it can be there to cover the most essential costs, like housing, bills and food.

You can check to see if you are on course for a full State Pension by using the Government’s forecasting tool. You also need to know when your State Pension will begin. You can find that out here.

Working out other sources of guaranteed income

Along with the State Pension, some people will be able to rely on other guaranteed income in retirement, for example from Defined Benefit pensions or buy-to-let property. Just like the state pension, this is valuable because you can rely on it to cover your essential needs so you won’t have to use pension savings to provide that income.

How much income will your pension savings give you?

Once you have an idea of what your costs in retirement will be, and the guaranteed income you’ll have to meet them, you can work out how much work your pension savings will have to do on top - and whether they will be enough. Be warned - this can be a shock!

Fidelity’s MyPlan tool can show you the kind of pension pot you’re headed for, and an estimate of the income this will provide.

These are the results for a man aged 45, earning £60,000 a year, with £200,000 already saved and setting aside a further £1,000 a month for their retirement. They have specified that they would like to replace 60% of their pre-retirement salary with retirement income when the retire at 68, and they have other sources of income in retirement worth 10% on their current income.

All these variables can be changed in the tool to see what effect they have. MyPlan works out that they would need a pension pot worth £731,000 to achieve their goals.


The tool also shows you the results in terms of the income you could expect. It is based on purchasing an annuity but bear in mind that there are several different ways to turn your pension savings into an income. (See below)

Enter your details to see how your saving stacks up. If the results show you coming up short, don’t worry. By altering your level of savings, your retirement age and the level of risk you take with your pension pot, you may be able to bring things back on track.

If more drastic action is needed, consider how you’ll manage on a lower proportion of your current salary in retirement.

What kind of income will suit you best?

There are different ways to turn your pension savings into an income. Most people will use an annuity, Pension Drawdown or a combination of both. There’s a full explanation of the ways to access your pension saving here.

Annuities offer monthly income that is guaranteed, no matter what markets do, but the money you use to purchase an annuity no longer belongs to you. Money invested in drawdown, on the other hand, is still yours and anything left in your pension when you die can be passed without Inheritance Tax applying, but the income you get depends on investment returns, so can fluctuate - it is not guaranteed.

Fidelity’s Retirement Income Estimator lets you enter details of your savings, your expected retirement date and your level of existing savings to calculate the level of income you could expect from a mix of an annuity and Pension Drawdown. You can shift the mix to see how that changes your expected income.

How you turn your pension savings into an income needs to be carefully considered. The Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at or over the telephone on 0800 138 3944.

You might also find it helpful to get support from one of the specialists in Fidelity’s retirement service. Just call 0800 860 0046 for free, helpful retirement guidance or advice for a fee, or go to to find out more.


1,2 Fidelity International's Retirement Savings Guidelines. November 2018

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a pension and tax treatment depends on personal circumstances and all tax rules may change. You can't normally access money in a pension until 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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