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How Much Money Do You Need To Retire?

Updated on August 14, 2014

How much money do you need to stop working and retire early?

If you are happy to work until you are 65 then live off an average salary, then you won't need a huge amount of money, but if you want to retire early and live a life of luxury and travel the world you will need rather more, but how much do you need? How should you invest for an income in retirement? How much do you need to put away each month?

Retire Young and Travel the World...

Disclaimer: Information in this and other linked articles is unregulated and for general information only and is not intended to be relied upon in making specific investment decisions. Appropriate independent advice should be obtained before making any such decision.

Retiring at 65 or 66 or 67 or later

If you are happy to work until you are 65 or older then live off an average salary (currently the median income in the UK) of £20,000 a year, then you won't need very much. There are also many ways to boost your income in retirement.

The best annuity rates are about 7% * (at time of writing) and the old age pension is a little under £100 per week, so to achieve "average" pay in retirement would need just £200,000 in a personal pension (or an ISA - Individual Savings Account) and to achieve "minimum wage" (a little over £10,000 per annum working full time) you would need just £70,000. Unfortunately most people actually have rather less than that when they retire. Obviously most of us hope to retire on a lot more than minimum wage.

Theoretically you need less money when you give up work than you do while working: you no longer need to pay for transport to and from work, nor for work clothes, expensive coffee, lunches and after-work drinks etc. and your tax bill may also drop (higher personal tax allowance and possibly a marginal lower tax rate) but you also have more free time and more time to spend your money.

* You of course don't need to buy an annuity to provide you with an income, but it is a good gauge of how much you could hope to take from your investments each year without too much risk of running out of money in old age. Another way to determine a sensible income to assume from an investment portfolio, is from the UK Government Actuaries Department or GAD tables which are downloadable from the HMRC web-site and provide a maximum pension "drawdown" rate depending on your age and current 15 year government bond yields.

But I want to retire early!

How much Money do you need to retire without too much risk?

If you want to give up work and live off your money, e.g. trading shares, Spread-trading or just actively investing there are some things to consider, to prevent financial disaster:

What are your minimum outgoings? This is the amount that must be covered before taking any risk with your assets: The costs that must be covered such as bills, food etc. In the 1990s many "Day Traders" went bankrupt because they needed to trade just to cover the bills and during a losing streak they ate into their capital and once you have lost it it is difficult to get it back. If you have bills of £1,000 a month that have to be paid this should come from some reliable source. Index linked government bonds are the only guaranteed way of getting inflation-proof return forever, but pay just 1.5% (plus inflation) so you would need £800,000 invested in index-linked gilts just to cover the bills, before even starting trading shares or Spread-trading

How About with a Bit More Risk?

Alternatively, taking a little more risk with a balanced portfolio you could have less than £250,000 invested to cover these essential costs. If you are willing to take on some part-time work or can cover some of this amount from blogging or with your Squidoo or other internet earning then this safety margin can be reduced. You then need to decide how much money you want to earn on top of this minimum risk reducing part of your portfolio and adjust the risk of the remaining part of your portfolio accordingly. Remember that if you lose your money you cannot get it back.

For details about how to earn money on the internet and create a suitably engineered portfolio to meet your requirements please see the related articles:

How to Make Money On Line

Financial Engineering



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    • Cronicbeats profile image

      Cronicbeats 3 years ago

      I always felt like you need a million just to be able to retire

    • profile image

      mstcourtjester 5 years ago

      Thanks for the good advice :)

    • profile image

      julieannbrady 5 years ago

      Ah, I have been test-driving this concept a little early! Been off work since October 2011 and have now started seeking outside employment. So, I need more money than I've been bringing in. News at 11. ;)

    • karen-stephens profile image

      karen-stephens 5 years ago

      thank you for reminding all of us...that we do not need that much to retire. more important is to have a VISION. thanks for the lens. ps. retire in CANADA to save $$

    • profile image

      frugal123 5 years ago

      Education on the subject is the best help to give anybody. Good work

    • kathysart profile image

      kathysart 5 years ago

      Money.. what a great subject.. smile. I am actually at the age where I could retire.. yup I am, but I don't see that happening for a long, long time, if ever. In so many ways I am fine with that .. I guess.. LOL. Great lens! Angel blessed.

    • favored profile image

      Fay Favored 5 years ago from USA

      Your title intrigued me. As I began reading your lens I learned quite a bit. I have a ways to go before I can retire according to this info ... better get busy :)

    • vkumar05 profile image

      vkumar05 5 years ago

      Some important discussion about financial planning. We need a lot more in this. Thanks for sharing.

    • vkumar05 profile image

      vkumar05 5 years ago

      Some important discussion about financial planning. We need a lot more in this. Thanks for sharing.

    • Zut Moon profile image

      Zut Moon 5 years ago

      What a Great Lens ...have featured it in my lens The Joys of Retirement

    • profile image

      PizzaPromoGuy 5 years ago

      Great Lens! One of my favorite books is "The Automatic Millionaire" and "The Richest Man in Babylon" These will both help others on their way to retirement :)

    • profile image

      anonymous 5 years ago

      Excellent information that we can all apply Andy. In my case, I think I will be Squidooing until my last breath!

    • profile image

      bigrockhq131 5 years ago

      I wanted to send you this bit of word so as to give thanks as before with your pleasant strategies you have documented above. It's really shockingly open-handed of you to grant unreservedly what many individuals would have advertised as an electronic book to get some money for themselves, mostly since you could have done it if you ever considered necessary. These smart ideas likewise worked to become a easy way to fully grasp that other people online have a similar dreams just like my own to learn a little more in respect of this matter. I'm certain there are several more pleasurable instances in the future for folks who see your blog post.

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    • profile image

      anonymous 6 years ago

      For me, at least 10 million before retirement. Thanks for this very informative lens.

    • profile image

      HeavenRelaunchReview 6 years ago

      What is the Best Cash ISA plan? You'l get the info here

    • aesta1 profile image

      Mary Norton 6 years ago from Ontario, Canada

      Good advice for those who want to have more freedom or retire well.

    • MargoPArrowsmith profile image

      MargoPArrowsmith 7 years ago

      Well, I can't imagine retiring, unless you mean, just not having to do what I don't want to do. But I won't retire, always want to work! :-D

    • ElizabethJeanAl profile image

      ElizabethJeanAl 8 years ago

      The thing that's tripping me up is health insurance. If I wait and collect a pension (six more years) I will have insurance at the group rate. If I retire now, I'm on my own. I still might do it, but if I teach one more year then I'll stay to the end.

      Great info

      Thanks for sharing


    • Sylvestermouse profile image

      Cynthia Sylvestermouse 8 years ago from United States

      This is exactly what scares me to death: "Remember that if you lose your money you cannot get it back." I really don't have enough years before retirement to survive a huge loss, but I know interest in a regular savings account is not my best choice either.

    • ZenandChic profile image

      Patricia 8 years ago

      Lots to think about when it comes to retirement

    • OhMe profile image

      Nancy Tate Hellams 8 years ago from Pendleton, SC

      I need to get my hubby to read this. He is 78 yrs old and works 2 jobs.