Reeves Blogs

When It Comes to Retirement Planning, How Much Is Enough?

Updated: Jun 3, 2021

When it comes to retirement planning, it is completely natural to worry about how much money will be enough to live on comfortably. That is why it is important to have a solid strategy in place. But just how much is enough?

Once you have painted your retirement picture, you can determine exactly how much you will need to live on. And, once you have decided upon this, everything else will fall into place. You will know how big your total pension pot needs to be and you will know how soon you can stop working.

This is a key element in your retirement plan and, as such, it is imperative that you put a lot of careful thought into it. As a Reeves client, we will help you do this as standard.

1. With a fine-tooth comb, we will sit down with you and assess your monthly outgoings – taking into account how these will change once you give up working, as well as factoring in new expenses you may incur in retirement such as new hobbies or holidays. We have considerable experience in this and will be able to point our areas you have forgotten or never even considered.

2. Once you have arrived at a monthly expenditure figure, you know what your monthly income needs to be. However, it is important to remember that this figure is what you need after paying any income tax.

It would be possible to take this monthly figure, multiply it by 12 and then multiply it again by the number of years you hope and expect to live. That is possible, but not sensible.

The truth is that a person’s spending requirements change as their retirement progresses. In the earlier years you will typically want to enjoy your newfound leisure. You may well want to embark on taking your dream holidays, maybe visiting relatives in Australia, or perhaps buying a classic British motorbike. It could be that you want to learn to play the piano, or simply go out and have a good time.

However, as the years pass and you have achieved what you wanted to do, your requirement to spend more money will lessen. Your children will be grown up and independent, you will take fewer foreign holidays, have less interest in going out or buying new clothes and you will drive less. Alas, you will be more content in life.

One Reeves client, Antony Evans (name changed), came to see us when he was 62 to discuss his retirement plans. Together, we calculated that he would initially need an annual income of £30,000, post-tax. This would allow him to fulfil some long held travelling ambitions, such as a tour of South America and to play some of the world’s best golf courses.

When he reached the age of 66, he would qualify for the state pension of £9,000 a year, so the annual withdrawal on his private pension pot would be reduced to £21,000 a year. He would continue to draw this until he reached 75, by which time he believed fulfilled his travelling ambitions and would be happy to confine his golfing to UK courses. Then, he would only need £22,000 after tax. So, with the state pension, he would have to draw £13,000 from his pension pot each year.

Five years later, aged 80, he accepts that he will have probably given up golf altogether and would only be going on holiday in the UK. Therefore, his income requirement will be just £15,000 a year. As a result, after the state pension, he would only be required to take £6,000 a year from his pension pot.

Once we had this conversation with Antony, we ran some projections with him. He realised that, with his pension savings of £450,000, he would be able to retire immediately at the age of 62two years earlier than he had hoped. It was a very pleasant surprise for him.

Every individual is different and so are their spending requirements. We recognise that at Reeves and that is why we do not operate a one-size-fits-all policy. Instead, we create bespoke plans individual to our client’s needs. As part of our service, for every client, we conduct a thorough retirement planning review once a year and twice if retired. This enables us to provide projections on how much money they need, how they can afford it and make sure that we are there every step of the way.


The articles are for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Names have been changed to protect identity.

No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.

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