How much money do I need?

How much money will I need in retirement?

  • Where you'll save money in retirement
  • Where you'll spend more in retirement
  • How much you'll receive in retirement

How much money do I need in retirement?

Budgeting for retirement can be more difficult than budgeting while you’re still working. Some costs may increase, such as heating your home, and you’ll have to work out exactly how much income you will be receiving from your pension.

Our research has indicated that members spend around £24,000 per year in retirement. It may be that you don't need as much money in retirement as you did while you were working. Check out our guide to how much you should be saving at different ages

How to work out your retirement budget

To set your retirement budget, you’ll need to get an idea of your current spending. Take three months’ worth of bank and credit card statements, payslips going back three months and three months of shopping receipts. Also remember to factor in one-off spends like birthdays, Christmas, holidays and car repairs. Our guide, How to plan an effective budget, has more information on what you should consider.

Now work out where you think you’ll spend more once you’ve retired – because your situation is changing, so will your spending habits. You’ll need to compare this with how much income you’ll be getting in retirement (from pensions, benefits or savings), to find out if there are any shortfalls.

What will you spend on in retirement?

Once you’ve retired, the sums of money you spend on certain things will change. 

  • Have you paid off your mortgage? If so, that will significantly reduce your monthly spend. However, if you’re still renting in retirement, you’ll have to factor that cost into your outgoings when budgeting.
  • Have your children moved out? Raising a child until they’re 18 costs a huge amount – so your costs should come down significantly once they've flown the nest.
  • You’ll save on commuting. The average annual rail cost of commuting into London is around £4,000, and that’s without factoring in parking at train stations.
  • Public transport. Over-60s get free off-peak travel on buses. And if you live in London, you can claim a Freedom Pass, which means you can use London’s public transport for free. For more on saving on rail fares, visit our guide to Cheap train tickets.

You’ll lose out on…

  • Leisure spending. You’ll probably be spending more money on hobbies and holidays. Think about how many holidays you’ll want to take per year, and remember to take advantage of senior discounts on dining out and theatre tickets. Our guide, What am I entitled to in retirement, has more on this.
  • Travel insurance. Which? research has found that people over 65 tend to pay more because statistically, they’re more likely to fall ill whilst on holiday. Shopping around will help secure you the best deal. Our Which? Recommended Providers for travel insurance are a good place to start.
  • Heating. As you’ll be spending more time at home, the chances are bills will be higher. The Winter Fuel Payment, available to people born on or before 5 January 1953, could get you between £100 and £300 tax-free towards your fuel bills.

It’s worth remembering that on average, life expectancy is increasing – men are living ten years longer than they did 50 years ago and women are living eight years longer. So your budget may have to cover a longer time period than expected.  To find out more, read our guide about how much money you'll have in retirement

Get a personalised answer to your pension queries

The Which? Money Helpline offers independent one-to-one guidance on a range of topics including pensions and retirement. If you're not a Which? member, and you'd like to get unlimited access to our Money Helpline experts, you can try Which? Money for two months for £1.


Please enable JavaScript to access this content.

More on this...

Last updated:

March 2016

Updated by:

Paul Davies

Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.