A recent article in the i newspaper [link at the end] tells readers a couple will need £34,000 a year to have a moderate retirement. The piece refers to former pensions minister Steve Webb and includes tips for making the most of your money. It suggest three levels of retirement income that you could aim to save for; basic; moderate and comfortable. Our budget of £27,000 a year fell somewhere between basic and moderate!
As I have written before, I thnk that everyone has different spending habits and priorities and no one person’s retirement will be the same as another but here was an article confidently prescribing the income you need for retirement. I wondered how they could be so precise.
The article states:
Frustatingly, the article doesn’t give much detail about how a retirees money would be spent so it is hard to understand the working out. Regular blog readers will know that we have quite a lot more holidays than the two weeks and long weekend the piece allow for. Even with only £27,000/year to play with we are usually away for over three months each year! The article suggests we are doing the impossible.
The clothing allowance of £800 per year is mentioned and it is implied that this amount is per person, budgeting £1,600 for a retired couple to spend on clothes. For the last couple of years we have spent between £600 and £700 on clothes for the two of us, quite a significant saving. Maybe with a full breakdown I would be able to see where else we spend less than this average moderate retired couple.
For a while my mind wandered as I tried to imagine how one person would spend £800 on clothes. I found my imagination just isn’t that good and I sought help from the John Lewis website. Some browsing revealed that you could spend £100 on a pair of jeans, not much more than I would spend on a pair of hiking trousers. These jeans [like my hiking trousers] would no doubt last years so doesn’t really explain the £800 per person. Ramping things up, I began looking at winter coats, sorting them by the highest price. Apparently you can spend over £1,000 on a coat! That is expensive but surely for that price it would last a lifetime! All this pointless browsing just proves that everyone’s retirement is different. There will be people who enjoy buying and wearing expensive clothes but I am not one of them.
Our clothing policy is that things are replaced when they wear out. If something doesn’t get worn during a year it goes to the charity shop with the exception of my back-of-a-drawer guilt clothing. I admit I own a couple of items that I never [or hardly ever] wear. I still have the frock I wore at my graduation in 1995 even though I haven’t worn it for years. I was so proud of my achievement when I wore my cap and gown [and this dress] at the graduation ceremony. I earned my degree at the age of 35 and the dress is still tied in with those memories and I haven’t been able to give it away.
Anyway, I have digressed. Back to retirement. Given that the article budgets so much for clothing it would be good to scrutinise other spending lines to see if they stand up to scrutiny. Without the detail I can only guess that the holidays are more luxurious than ours, more expensive supermarkets are used for shopping and maybe decorators and new curtains are allowed for rather than DIY and second hand.
How much income you need in retirement is a common and legitimate question and despite my critique, the article does contain some useful advice for anyone planning their retirement so please read it. What it doesn’t say is that the only way to know how much YOU will need in retirement is to monitor your own spending, rather than relying on someone else’s estimate. Once you have a handle on how much you spend and what you buy, you can begin to estimate what you need. It might be £34,000 or it might be less or more. Only you will know if your own retirement essential is watching a new film at the cinema every week, gym membership, drinking a glass of high-quality wine every evening or maybe all or none of these things. Mapping out your spending and planning accordingly will help you have the retirement you want. You certainly don’t have to spend £800 a year on new clothes but if that is your priority then budget for it.
You can read the article here.