Can I afford to retire?

Everybody’s circumstances are different but the key consideration for most people when they think about retiring, will come down to factors such as:

  • if they’re renting, paying a mortgage or mortgage free,
  • if they have any debt,
  • if they plan to keep working,
  • how much money they have saved in pensions and other investments.

How much do I need to live on?

People estimate that living reasonably comfortably in retirement requires around 60%# of the income you had while you were working. However, as a guide for a basic standard of living, a retired couple will need a minimum income of £11,362* per year. If you’re single that amount becomes £7,740* per year.

Remember, these figures aren’t set in stone. Use them as a guide to help you work out what you’ll need for your own retirement.

# Source: Scottish Widows, October 2014

* Figures calculated using minimumincome.org.uk – as at June 2015.

What about State benefits?

Once you reach your State Pension age in addition to any State Pension you may be able to receive help in the form of various State benefits such as:

  • Winter fuel payment
  • Housing benefit
  • Council tax support
  • Carer’s allowance

Inflation

The last thing you want is inflation eating away at the value of your income.

The good news is, there are steps you can take to protect the income you take from your pension pot. Some products such as escalating or index-linked annuities are designed to provide some protection from the effects of inflation. And there are several ways to leave your pension pot invested so the money you don’t need now has the potential to grow.

Your State Pension is also protected: it goes up at least 2.5% each year – more, if prices or earnings rise by more than that. This is known as ‘The Triple Lock’.

Working during retirement

Gone are the days when your employer decided when you stopped working for them. These days, it’s up to you. That gives you the freedom to choose whether you continue to work and how.

And if you want to continue working while taking your State Pension, you can.

Deferring Your Pension

You can take your pension pot from age 55 if you wish. Your pension pot will continue to be invested until you decide to access it. You can claim your State Pension once you reach your State Pension age. However you don’t have to. Your State Pension will increase every year you put off claiming it.

Debt

If you are in debt, you should consider the impact on any debt you may have. If you cash in all or part of the pension pot, then it will no longer be protected from any debt proceedings against you. This means that creditors may therefore have a call on cash taken from your pension pot.

Using your pension to pay off debts

If you’re looking to use your pension pot to pay off your debts it’s important to make sure you’ve still got enough money to live off in your retirement. The money you have left after tax might not be enough. It might be worthwhile looking at other options to pay off your debt which can be found on the government website: https://www.gov.uk/options-for-paying-off-your-debts/overview

More information

You can find impartial advice on debt on these government websites: