Having enough cash to fund a comfortable retirement is just wishful thinking for most people as their savings will fall short of what they need to spend to maintain their dream lifestyle.
The gap between what people want to spend and the average retirement income for someone giving up work this year is £100 a week.
Table of contents
- How much retirees earn in 2021
- How much retirees spend in 2021
- How retirement income is spent
- The retirement spending gap
- How much do I need to save for retirement?
- Saving for retirement at different life milestones
- How Much Money Do You Need To Retire FAQ
- Related Articles, Guides and Insights
- Questions or Comments?
The data comes from two recent surveys.
One, from consumer champion Which?, reveals a comfortable retirement costs a couple £26,000 a year.
And for couples hoping for a life of luxury after giving up work, the gap is even wider at £371 a week.
The other, from equity release firm Key Retirement, shows the average retirement income this year is £21,663.
Even though that’s a 5% improvement on last year’s figure, it’s still not enough to pay for much more than the essential bills.
How much retirees earn in 2021
The good news for someone retiring in 2021 is that they can expect an income of around £1,000 a year more than those who gave up work last year.
The increase is put down to a 3.9% state pension rise and the coronavirus pandemic pushing a lot of wealthier older workers into retirement as their work dried up during lockdown, says Key Retirement.
Although the average retirement income someone can expect is £21,663 a year, homeowners come out slightly better, receiving £23,392 compared with renters picking up £16,356.
Couples are also better off – banking £22,500 compared with someone who is single, who gets £18,900.
How much retirees spend in 2021
Which? spoke to nearly 7,000 retirees in February 2021 and crunched the data to find out how much people really spend in retirement.
The table shows the results for singles and couples:

How retirement income is spent
Retirement lifestyles can vary widely depending on your income.
Wealthier retirees can look forward to jetting off to the sun and city breaks in Europe with a new car, meals out and leisure club membership.
The picture is different for the poorest retirees who have just enough cash to scrape by whose budget won’t stretch to exotic foreign holidays, a new car or regular days out.
Here’s a breakdown of how retirees are spending their money:
Essential | Comfortable | Luxury | |
---|---|---|---|
Long haul holidays | – | – | £5,652 |
European holidays | – | £3,588 | £3,588 |
New car costs | – | – | £4,438 |
Groceries | £2,256 | £2,256 | £2,256 |
Housing costs | £2,592 | £2,592 | £2,592 |
Insurance | £1,824 | £1,824 | £1,824 |
Transport | £1,524 | £1,524 | £1,524 |
Utilities | £1,688 | £1,668 | £1,668 |
Recreation/Leisure | – | £1,188 | £1,188 |
Household goods | £1,044 | £1,044 | £1,044 |
Charity | – | £1,308 | £1,308 |
Leisure membership | – | – | £1,044 |
Health | £972 | £972 | £972 |
New clothes | £696 | £696 | £696 |
Tobacco/Alcohol | – | £756 | £756 |
Meals out | – | – | £744 |
Total | £12,596 | £19,416 | £31,294 |
The retirement spending gap
How much someone needs to fund a comfortable retirement depends on several factors, like relationship status, if they own a home and how much they have saved while working.
Most people hope for at least a comfortable retirement but are unlikely to fulfil their dream.
Single retirees on an essential or comfortable budget arguably come out the best – with a £113 a week cash surplus for essentials and breaking even on a comfortable lifestyle.
Couples fall well short of attaining a comfortable or luxury lifestyle, as the table shows:
Budget | Annual income needed | Average retirement income | Annual spending gap | Weekly spending gap |
---|---|---|---|---|
Essential – single | £13,000 | £18,900 | £5,900 | £113 |
Essential – couple | £18,000 | £22,500 | £900 | £17 |
Comfortable – single | £19,000 | £18,900 | -£100 | -£2 |
Comfortable – couple | £26,000 | £22,500 | -£7,100 | -£137 |
Luxury – single | £31,000 | £18,900 | -£12,100 | -£233 |
Luxury – couple | £41,000 | £22,500 | -£22,100 | -£425 |
How much do I need to save for retirement?
Retirement income is a layer cake, with money coming from several different sources.
The first layer is the state pension. The current full payment is £179.60 a week, with the amount increasing at least in line with the cost of living each year.
Not everyone gets the full payment – you can find out how much you are likely to get with a government online calculator
Next comes your private or workplace pension.
If you have a final salary or defined benefit (DB) pension, the scheme pays out depending on your length of service with your employer and your salary level on retirement. These pensions are generally inflation-linked as well.
If you have a defined contribution (DC) pension, the scheme pays out according to the value of the fund and is unlikely to be inflation-linked.
Finally, the last layer is any income generated from savings or investments, like buy to let rents.
Researchers from Which? have worked out you need as a fund to pay for different lifestyle levels on retirement.
Couples planning to live comfortably need a fund of £265,420 to get £26,000 a year from an annuity or £154,700 to gain the same income from income drawdown.
The numbers escalate dramatically for couples wanting a luxury retirement.
A couple needs a £757,000 pension pot to buy an annuity paying £41,000 a year or £442,000 for the same income from income drawdown.
Saving for retirement at different life milestones
Putting the jigsaw together, you can see how much you will spend for different retirement lifestyles and how much savings you will need to hit your spending targets.
Now you need to know how much to save along the way.
Conventional wisdom says the sooner you start to save the quicker you will hit your targets, but unfortunately for many, this boat has sailed, and serious saving only starts in the 40s or 50s.
Which? has looked at the numbers and come up with how much you need to save a month aged 20, 30, 40 and 50.
First come the amounts couples need to save for a comfortable retirement on a pension fund of £154,700:

Next, the amount a couple needs to save to fund a luxury retirement lifestyle on a pension fund of £442,000:
How Much Money Do You Need To Retire FAQ
How do I know how much money I need to retire?
You can use the Which? research as a benchmark or estimate your own figures based on your current lifestyle.
Can I include rents and dividends from investments as retirement income?
Unless you own your rental properties outright, you need to consider how you will pay off the mortgage(s).
How long am I likely to live?
I want to invest in shares – should I go direct or through a pension?
Do the same retirement income rules apply to expats?
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