How much income do you need for a comfortable retirement? New research has put a post-pandemic price on the answer.
One traditional way to answer the question of how much income you will need in retirement is to fix the amount as a percentage of pay. For example, when final salary pension schemes were more common, their target was often around two thirds of earnings. While this approach produces an easy to calculate number, it is arbitrary. For low earners it may produce too low a number, while at the opposite end of the scale the result may be too high.
An alternative is to focus on retirement living standards, an option that has been supported in the UK by the Pension and Lifetime Savings Association (PLSA) and is mirrored by approaches used in other countries. The PLSA sets three levels of post-pandemic retirement:
Where would you want to be on those scales? It’s likely that most of us would veer towards ‘Comfortable’.
Now for the annual cost in terms of after-tax income:
If the numbers surprise you, then it is probably time to start checking that your retirement funding will meet the standard of living that you want.
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