When will you retire?
A supplement in the Sunday Times posed that very question, before laying out some interesting statistics on retirement age and relative income in different countries.
Retirement age since 1970
There has been a lot of coverage in the UK at the raising of the state pension retirement age from the ‘traditional’ age of 65.
Figures on the average age a person “withdraws from the labour force” in OECD countries show that in 1970, people retired after 65 years of age.
- By 1994, the average had dipped to around 64 for men and 63 for women.
- By 2020, this had risen to an average of 64.3 for women and 65.2 for men.
In contrast, the average life expectancy has risen from just 53 in 1960 to a worldwide average of 72.75 in 2019.
So, are people are living longer, and hence taking pensions later?
Or is the decision to retire later fuelled by the potential income achievable?
Average disposable incomes
Another graphic in the supplement showed the average disposable income of those aged over 65 as a percentage of the average disposable income of a country’s population.
Australia had the lowest, with the average disposable retirement income at 75% of the average disposable income. The UK came in with 81%, whilst Italy had 100% and Israel an impressive 103%.
This disparity in income between full-time working and retirement may account for the fact that 55,000 more UK 65-year-olds continued working into the 65th year, with 1.8million extra hours worked by the over 65s in a week-on-week average.
However, since the government raised the retirement age between late 2018 and 2020, many may have had to stay on working if their retirement was dependent on receiving their state pension.
How long could I be retired for?
When life expectancy was lower in the 1970s, it was not uncommon for retirement for a man to last just 10 years. Fast forward to 2021, and the life expectancy beyond the age of 65 becomes:
- 18.5 years for men
- 21 years for women
A rise in the state pension age…
The UK is not the only country raising the age at which people can receive their state pension. Denmark plan to increase it to age 74, with Italy raising it substantially from the low 60s to the low 70s.
The UK rise will see the state pension age reach 67 by 2028, but that’s still lower than planned by Estonia, The Netherlands, Finland and Portugal. By 2028, the UK state pension age will be on a par with the US, Germany, Australia and Belgium.
… And your own private pension age
The government will also raise the minimum age for accessing your private pension, known as the ‘normal minimum pension age’ (NMPA). According to the UK Parliament website:
“This is the earliest age from which individuals can access workplace or personal pensions, and measures in the Finance Bill to increase it from 55 to 57 from 2028.”
How much money will I need?
How much you need to retire does very much depends on what kind of retirement you want to lead. What is ‘enough’ for one person may not be sufficient for another.
The Pensions and Lifetime Savings Association (PLSA) suggest that a person living in a single household would need a pension pot of £440,000 for a moderate income, and £966,000 for a comfortable one (Based on an ongoing savings rate of 12%, which seems a lot…)
PLSA Retirement Living Standards
In terms of income, the Retirement Living Standards suggested by the PLSA for a couple are:
£17k a year minimum
£31k a year for “More financial security and flexibility”
£50k a year for “More financial freedom and some luxuries”
Those numbers may well surprise you as to how low they are. Many would-be retirees just don’t realise that they already have sufficient funds to retire now AND lead the lifestyle they want in retirement. They don’t have to wait and rely on their state pension to stop working.
Others continue in part-time roles to keep some income flowing in, and to give them time to ease into full retirement in a few years’ time.
How much will I need to retire?
Knowing your “number” is important. You may already have more than enough already. You might opt to stay in work longer to increase the level of retirement lifestyle you can afford. Or you may have sufficient to enjoy a simple retirement so decide to leave your current fulltime job. You may also choose to seek a new part-time avenue which will add further income to your pension pot.
Want to know your number? Ask a retirement coach
At Panthera LIFE, my team and I can help you calculate your number based on all the savings, investments and private pensions you already have., and what you’d like to achieve in retirement. We take a holistic look at your retirement and use existing financial information to work out if your number is at the right level.
We cannot offer financial advice on how to change or manage your current portfolio, but we can show you how it’s working for you now and potentially into the future.
More importantly, through my 1 to 1 coaching, you can work through the eight core elements of a retirement with purpose – only one of which is financial.
Not sure if you need coaching?
Join our next Retire with Purpose 60-minute Introductory workshop to discover more – it’s free and online, so you can join from the comfort of your own home.
Want to talk through retirement planning?
I’m here to help!