In this brief blog we are going to consider the question “ Can I retire on £250 000?“

Can I retire on £250,000?

Whether you can retire on “250,000 will depend heavily on your standard of living and the annual cost of living which you have incurred over the past few years.

A lot of studies say people should try and target to spend at least 66% of their working ae income when they are retired but in most cases, people will likely spend around the same amount they spent when they were working as they won’t want to reduce their standard of living but rather increase it.

A study was carried out and figures published by the government in the auto-enrolment review announced in December, which highlighted that those on average earnings of £27,000, should be targeting an income equivalent to two-thirds of their working-age income – £18,000 a year or £1,500 a month. This means they would need a pension pot of £300,000 to live off.

“The calculations for the average amounts needed for retirement make several assumptions about someone’s life – including that they will stop work at 65, they will also have a full state pension to top up their savings and that they will have paid off their mortgage.

The research also assumes they will use their pension savings to buy an annuity retirement income.”

How long is a pension supposed to last?

A pension should last you throughout retirement but you will find that this isn’t the case with most pensions due to how they have been managed or improper planning on our sides.

Your pension will usually guarantee payouts for a specific term. This could be 5 years, 15 years or even 20 years. If you die before the payout period completes then a beneficiary of yours who you have hopefully mentioned in your will may continue to receive payouts from your pension.

Can I retire with 500 000 in savings?

Whether you can retire with 500,000 in savings will depend heavily on how much the average annual spending is per year in your country and how much you typically spend per year.

Your current age and your life expectancy based on your current country or the country you intend to retire in will also determine if 500,000 will be enough to retire with.

For example, if the current annual cost of living in your city is 50,000 and you estimate you will spend about the same amount then 500,000 will only last you ten years before you need to seek social care from the government or go back into employment.

If you are currently 60 years and you estimate you will dire by 70 because this is the typical life expectancy of the country or region you live in then 500,000 is fine but if you estimate you will live till your 90 years then you need another 1,000,000 to live comfortably for the next 30 years.

If some or all of the 500,000 is earning interest and this interest is up to 50,000 per annum then you can live off the interest earned from this capital. This is, however, a risky way to look at things as if the interest rate offered falls then you may suffer financially.

In this brief guide, we discussed the question” Can I retired on £250,000?”. If you have any questions or comments please let us know.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.