The big question
How much do I actually need?
It's the most-asked question in personal finance and it has the least useful standard answer. Here's why the big round numbers mislead, and how to get to yours.
It's the most-asked question in personal finance and it has the least useful standard answer. Here's why the big round numbers mislead, and how to get to yours.
You'll see figures like £500,000, or £1m, or “25 times your spending”. They're not wrong exactly. They're just answering a different question from the one you asked.
The number you need depends on four things, and only one of them is the pot: what you spend, when you stop, what other income you have, and how long you live. Change any one and the answer moves by hundreds of thousands. Two people with identical £400,000 pots can be comfortable and broke respectively.
“How much do I need?” is really “can I stop when I want to, and not run out?” That has an actual answer, and it's specific to you.
Work backwards. What does your life cost now, and what will it cost when you stop?
Most people's spending falls somewhat at retirement — commuting goes, the mortgage is often gone, children have usually stopped being expensive. But it falls by much less than people expect, because time you used to spend at work is now time available to spend money.
Guessing. Ask someone what they spend and they'll name a figure confidently, and they'll typically be out by several hundred a month. That error compounds through every year of a thirty-year projection.
The free Healthcheck connects your bank read-only and sorts the last few months automatically. It's the difference between a plan built on a fact and one built on a hope.
Take someone who wants £3,000 a month after tax from 62, in today's money. That's £36,000 a year.
The full new State Pension is roughly £12,000 a year — but not until 67 or 68. So from 62 to 67 they need the whole £36,000 from savings. After that, about £24,000.
Five years at £36,000 is £180,000 before the State Pension arrives. That gap is the single most expensive part of retiring early, and it's the bit people forget entirely.
£24,000 a year from 67 to 100 is thirty-three years. At 3% real growth, funding that needs roughly £530,000 at 67.
Around £710,000 at 62 — but it's not really one number, because tax, the order of returns and how long they actually live all move it. That's why a projection beats a rule of thumb.
Retiring at 62 instead of 67 doesn't cost five years of income. It costs five years of income plus five years of growth you no longer get plus five more years of drawdown. That's why the stop date is usually the most powerful number in the whole plan.
Comes from the 4% withdrawal research. A reasonable starting point, but it ignores the State Pension entirely — which for most people is the single largest inflation-linked income they'll ever have. Include it and the number drops a lot.
A hangover from final salary pensions. It anchors to what you earned rather than what you spend, and those can be wildly different. Someone earning £80,000 and living on £40,000 needs far less than the rule suggests.
Figures like this come from national research and are genuinely useful for orientation. They are not useful as your target, because they describe a standardised basket rather than your life, your mortgage or your children.
Your real spending, your real other income, your real stop date, run forward properly. It's more work and it's the only version that answers the question you asked.
The most useful floor is whatever covers your non-negotiable costs — housing, food, energy, insurance — from guaranteed income like the State Pension and any defined benefit scheme. Get that covered and the rest of your money is buying choices rather than survival, which is a much more comfortable place to plan from.
More than almost anything else. Roughly £12,000 a year, inflation-linked, paid for life, and for a couple who both qualify that is around £24,000 between them. Replicating that from a pot would take a very large pot indeed. Check your forecast on the government's site — many people have gaps they can still fill.
Then the gap years before the State Pension become the dominant cost, and you also need to think about when you can access pensions at all — normal minimum pension age is rising to 57 in 2028. Retiring at 55 rather than 62 can easily need a third more capital, mostly to fund the bridge.
Only if you genuinely intend to sell or downsize, and then only for the amount you would actually free up after moving costs and buying somewhere else. Plenty of plans quietly rely on releasing equity that the person has no intention of releasing.
Start with the free projection on this site — it takes about two minutes and gives you the shape. If several parts are pulling against each other, that is what the Plan is for.