How much money do I need to retire is a question that we are asked regularly.
How Much Do I Spend?
The starting point is to work out how much money you will need in retirement.
You now have your target income needs.
Options at Retirement?
There are usually options to completely cash in your pension fund but you may be taxed heavily.
Work on an annuity rate for an inflation linked annuity/increase each year with a 50% spouses benefit of around 2% guaranteed.
Work on a flexible drawdown dividend/growth rate of net 4% pa after charges.
How Much Money Do I Need to Retire?
If you have £100,000 and invest in an index linked annuity, you will receive approximately £2,000 pa index linked.
If you have £100,000 and move to flexible drawdown on a balanced, medium risk profile, you will likely receive £4,000 pa drawdown income.
Therefore, if you need £20,000 pa:
Using a guaranteed for life index linked annuity, you need a pension pot of c£1m.
Using non-guaranteed flexible drawdown, you will need a pension pot of c£500,000.
Pension Modelling Calculators
Pension Target Pension Shortfall
Pre-Retirement Advice
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