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How much does a married couple need to retire

Pensions / At Retirement Planning

With the cost of living crisis, working out how much does a married couple need to retire is now even more important. Food inflation has been increasing and shows no sign of reducing.

When you stop working, part of the planning process is to work out your income needs. The income needed will vary from person to person.

The amount of income you will need will vary from year to year. In the early years of retirement, people tend to spend more. Doing all the things they have put off.

The Pensions and Lifetime Savings Association (PLSA)

PLSA is an association with a mission. Their focus is to promote the value of retirement savings. They believe every single person should have a secure income when they reach retirement age.

PLSA works to educate people on the benefits of saving for retirement. They partner with people and companies to provide this education.

The PLSA produce data on minimum standard income needs each year. They aim to show you how much income you need each year in retirement. It depends on your standard of living, location and marital status. 

The data covers three categories: minimum, moderate lifestyle (average retirement) and comfortable living standard.

The living costs in London are higher than in the rest of the country. The graphic later in the article shows the current income needs.

Each year more people in the UK are living longer. It has become even more critical to plan for retirement. The amount of savings people have needs to be much greater than before.

This means they must save more money for a comfortable retirement income. This period of life is referred to as the “golden years”.

Calculating your income needs in retirement

Planning for retirement is essential. One of the factors to consider is the yearly expenses once you retire.

Calculating annual income needs can be daunting.

The PLSA table below is a good rule of thumb. This will give you a good idea of income needs.

how much does a couple need to retire

Each person’s needs will be different. Making sure you have enough money for retirement is essential. This way, you can enjoy your retirement years.

To calculate your income, consider what type of life you want in retirement. Do you plan on travelling each year? Will you need help with medical expenses? What other activities do you hope to pursue during your golden years?

You can add up the costs once you know what lifestyle you want.

This could include travel expenses, medical bills, and insurance premiums. It could also involve hobbies or club fees. You should include regular expenses and household bills.

Inflation rates tend to be around 2-3% per annum. This is not guaranteed, as inflation in 2023 is far higher than this. You’ll need to take this into account when you work out your income needs.  

It would help if you also considered any one-off costs in the future. Include items such as a new car, gifts to children, and other large amounts.

It’s wise to consider unexpected events like accidents or illnesses. Unforeseen events and costs could drain your savings.

Take into account any changes to your future spending in retirement.

Reviewing your expenses gives you a good idea of your income needs. 

Once you have done this, you can move towards a clearer financial future.

Key Points for Married Couples Planning to Retire

Retirement can be a joyful and relaxing time. It is essential to consider how you both feel about retirement. Are you eager to retire or worried about financial security?

It is essential to consider other income.

This could be workplace pensions, private pensions, and state pension benefits.

Another factor is lifestyle expectations. For example, do you want to continue living in the family home or downsize?

The question of finances is essential. What savings and pension pots do they have? What steps can they take to ensure those funds last throughout retirement?

Different Retirement Strategies for Couples in the UK

Retirement can be a tricky subject, especially when planning and making decisions.

One approach is the “split strategy,”. Each of you has your own investments or pension schemes.  This is the most common option due to pensions legislation in the UK.

Another option is the “joint strategy”. Whereby partners hold investments in joint names where possible. There’s also the “hybrid strategy”. This involves a combination of split and joint approaches.

Retirement Income from multiple sources

Most retired couples will have income from more than one source. For example, this could be from pensions, savings, property or cash.

Working out the best way to take income and from where can be difficult. How you take income is so important and can greatly affect your finances. If you are unsure where to take your income, seek advice.

When planning for retirement, everyone’s situation is different. Choose a financial adviser who can advise you on all your finances. Advice on retirement and investment advice are often linked. Decisions on one area could have an impact on another.

Pension Providers & Investment Opportunities for Couples

Pension providers allow you to take income in several ways. This could include flexible income drawdown, UFPLS or an annuity. Each option has advantages and drawbacks of each option. 

Take into account that some are more risky than others. You must assess their situation and the level of risk you can take.

Pension providers may offer a wide range of investment options. When you require retirement planning advice, understand how your pensions work. What tax-free cash is available, and how your income will be taxed?

Cautious investments provide stable returns but lower potential gains. Risky investments have higher risks but may offer greater rewards.

Take into account fees, tax and risk when selecting a suitable investment. If you are unsure how to do this, seek advice.

You may also need to consider tax planning if you have significant wealth. This is becoming more important as property prices have increased substantially over the last few years. Inheritance tax is an optional tax and can be avoided with careful planning.

Working with a financial advisor can be beneficial for both of you. They can explore complex decisions and create tailored plans that meet your needs. They will use software or a pension calculator to help you make the best decisions.

Conclusion

It’s crucial that retirement planning should be an ongoing process.

Review your goals and plan each year to ensure you are on track. You can then make changes if required. If you have access to a retirement calculator or spreadsheet, even better.

To talk in more depth about planning for retirement, please get in touch with us.

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