How Much Do I Need to Retire in the UK - Sustainable Spending in Retirement

The question of how much is 'enough' to retire on is highly variable and personal value. However, that doesn't discount that usefulness of having a grasp of the 'rules of thumb' for the ballpark sums of money and their related 'sustainable' spending amounts that can result.

When I say "sustainable income" here, I mean income that should last for your entire retirement so you never run out. This is typically panned up to the age of around 96 and is usually put through the mill of a Monte Carlo analysis to give a reasonable success rate that is acceptable. The scenarios below were run against a standard 60% stocks / 40% bonds (both global) with standard rebalancing used between the 2 asset classes and a target retirement spend of £20K, £30K, amd £40K per year.

The following examples of 'sustainable income' have been collected from good sources to give ballpark figures. This is not an automatic target for everyone reading this article... it's just the ballpark after all. (It should also be noted that the scenarios take into account state pension so much less is needed over the longer term than if you are planning without the reliance on state pension.)

Early Retirement at 55

£300K = £20K sustainable spending (sustainable withdrawal rate = 6.5%).

£500K = £30K sustainable spending (sustainable withdrawal  rate = 5.6%).

Note: the sustainable withdrawal rate is higher than the standard 4% as the UK state pension does much of the heavy lifting.

Retirement at 60

£233K = £20K sustainable spending (sustainable w/d rate = 6.5%).

£456K = £30K sustainable spending (sustainable w/d rate = 5.6%).

£688K = £40K sustainable spending.

Studies (not all though) have shown that 100% stocks portfolio has a similar failure rate but the upside is far greater. So in theory a no brainer… BUT the drawdown and drawdown length can be a lot worse.... is it worth it? 

a 4% SUSTANBALE SPENDING RULE OF THUMB: -

• £650K with 4% rule gives a sustainable £26K/£27K sustainable spending per year (in todays money) … I believe that is NOT including the state pension hence the large disparity with the £688K = £40K spending scenario above