Anyone planning for FIRE1 knows it’s hard to think about retirement living standards while you’re still having a blast in your 20s and 30s – or even when you’re neck-deep in your responsible 40s and 50s.
Like a precog from Minority Report, you can only glimpse fragments of your future.
Happily, intrepid retirees have sent us back reports from the frontier with enough detail to fill in the ‘Here Be Dragons’ gaps in your FI map.
The resultant research – Retirement Living Standards in the UK in 2023 – plots three tiers of retirement spending: from Minimal to Moderate to Comfortable.
The annually-updated paper also reveals what kind of retirement living standards such spending really gets you – from people who are already doing it.
Much ado about much more than nothing
Retirement research gives us a shortcut to answering that perennial awkward cocktail party question: How much do I need to retire?
Okay, maybe it’s only personal finance bloggers who get asked such questions at parties…
Anyway, instead of doing laborious calculations on a spreadsheet, you could just pick one of the consensus retirement income answers published by the Pensions and Lifetime Savings Association (PLSA).2
We’ll get to those in a minute. But a bonus of this research is it also includes testimonies from retirees and near-retirees drawn from various socio-economic backgrounds and regions across the UK.
If our retirement future is an unknown country, then their words act like an audio tour guide. We learn something about what really matters – and as ever, the experience of others might help us find our own path.
Plus it’s interesting to read. There’s nowt so queer as folk!
Okay, let’s start with the hard data. After that we’ll move on to the fluffy anecdotal evidence.
Retirement living standards 2023: income targets
Source: PLSA
This table is a bronze, silver, and gold rostrum of annual retirement incomes – as determined by sampling members of the UK public aged 55 or older.
There’s also more granular detail on what you get for your money at each level. We’ll get to that shortly but – spoiler alert – the Minimum lifestyle isn’t factoring in many trips to Ayia Napa.
What’s not clear from the table is the income numbers are after-tax.
This makes it an interesting contrast with the UK median household disposable income3 of £32,300 as of the end of 2022, according to the most recent ONS data.
As for the median retired household income, that’s £26,300. Not much more than the Minimum spending level for couples in the table.
Note that the PLSA expects the State Pension to do much of the heavy lifting in retirement, especially at the Minimum standard.
This is why we think there’s no need to fear the State Pension being done away with. The social fallout of scrapping it would be catastrophic for any government.
Solo sorrows
Another thing that leaps out from the table is life is expensive for singletons.
The most effective cost-saving measure any retiree can make is to couple-up. No wonder there are so many senior Casanovas out there.
Be sweet to your significant other and keep them healthy. Give flowers, not chocolate. (But maybe think twice before buying them a Peloton.)
What you get for your money
To understand the life of Riley promised by the table, feast your eyes on this:
There is much social division written into the curt lines above.
For example, I struggle to imagine life without a car. However I don’t personally need a fancy two weeks in the Med every year.
Also, I know plenty of people who substitute time and talent for money when it comes to gift giving.
You’ll draw your own conclusions. I’d love to hear them in the comments.
While the table forces a statement of spending priorities, the reality is that many of us will drift back and forth across the tiers.
For example, The Accumulators spend less than the Minimum on clothing. We’re in the Comfortable zone on food, though.
Retiree vox pops
What I most like about this research isn’t the numbers, however. It’s the voices.
The participants discuss their lived experience for each major spending category. Like this, a portrait emerges of retirement reality, painted in the primary colours of what money can buy.
The anonymous quotes below are excerpts from the study’s group sessions.
Food spending
The snapshot above shows the foodie living standard each income band affords.
The Comfortables are clearly loading their plates with much more spice of life than the Minimums.
At least on the surface…
One of the things the FIRE community has been great at uncovering are ways to enjoy life without throwing money at it.
For instance, you can take turns hosting dinners with your friends, which keeps you all socially engaged – and hopefully well-fed – without the overheads of eating out.
Still, rampant inflation in recent years hasn’t helped on this score, either. As one woman told the study:
I don’t think it’s just so much taking people out, but it is having people to the house to cook for them… which you are spending quite a lot of money to then invite people round to, you know, feed five or six people which I would probably do once a month.
In my 20s I spent like The Comfortables on eating out. That was just how I lived the life.
Now I’m under-spending The Minimums and I’m happy with that.
Housing spending
Minimums pay social housing rent. Moderates and Comfortables are assumed to have paid off their mortgages by retirement.
But today’s retirees aren’t sure the next generation will be so fortunate:
I think that it is probably reasonable now that they would own it but in ten years’ time perhaps they would be more likely to rent?
Personally, I think we’ve fallen short as a country on home ownership. It’s the height of hypocrisy to hoover up housing stock and lock future generations out of the market by failing to build.
It’s creating generational divides that put social cohesion at risk – even as up-and-coming generations are still meant to bankroll the NHS, long-term care, State Pensions, and cleaning up the climate crisis.
Back to retirement, and divorce looms large as a catastrophic roll of the dice in the game of housing snakes and ladders:
Lifestyles nowadays, people like myself got divorced a couple of times, I ended up on my own and … I live in rented. I have had houses and owned them in the past, but because of circumstances and stuff I don’t.
Divorce is often mentioned by readers in the Monevator comments as a third-party calamity. (Excuse me while I google ‘thoughtful gifts’.)
Speaking of unhappy endings I’d rather not think about…
Body disposal etiquette
Being at an age where they’ve seen plenty of family and friends pass away, the study’s focus-grouped retirees are very pragmatic:
You could die with a million pounds but have your family got access to that million pounds to bury you?
Probably not because it has got to go through probate and solicitors so they might not have the £3K, £4K, £5K to bury you next week or in a fortnight’s time.
Pre-paid cremation plans are included in the Moderate and Comfortable budgets. The study’s interviewees were resolute that they didn’t want their loved ones having to foot the bill.
Mrs Accumulator is under instruction to pop me out with the bins. But she says she will put me in the freezer so she can still chat to me.
We’re gonna need a bigger freezer.
Health issues
We all have teeth that get holes in them and eyes that go wonky, whatever our financial means.
So for dentistry, for example, each of the retirement living standards bands includes the cost of a check-up every six months and one treatment per year, such as a filling, as well as including the cost of replacing dentures every five years.
In an ominous sign of the times, contributors voiced fears about being able to rely on the State for medical treatment:
You need to be able to have money available in case you need [it] because you can’t rely on the NHS well unless you want to wait in pain for ten years or something.
Private healthcare is always a talking point for the study’s focus groups, but it apparently loomed extra large in 2023. It was not included in the retirement budgets this time – but for how much longer?
Funding the NHS feels like another slow-moving car crash that we’re not grappling with as a society.
Are we prepared to pay more in taxes? Can we reduce the burden on the NHS by looking after ourselves more? (I mean by living healthier lifestyles that increase our chances of staving off chronic conditions.)
In any event, all the private health insurance in the world won’t save us from dying if we need urgent assistance but have to wait two days for an ambulance.
Moolah for manscaping
At least if you’re hit by the proverbial bus, you might be more likely to have your best face on for it these days.
The various spending budgets have always included beauty treatments for women. But now there’s a budget for men too at the Moderate and Comfortable levels.
The researchers note:
“a shift in social norms and expectations and that, as one participant put it, ‘they like it all these men nowadays, they are all grooming themselves aren’t they?’.
The budget included for women covered the cost of beauty treatments, such as manicures and eyebrow threading.
However the focus groups suggested the budget for men could cover the cost of ‘grooming’ such as a shave at the barber or a facial massage, as well as, for example, occasional physiotherapy appointments or sports massages.
While some may despair of ever escaping from society’s expectations about personal appearance, at least it seems positive that:
…in general, groups talked about retirement now being a far more active period and as a consequence there should be a budget to cover these sorts of treatments.
Social and cultural participation
Comfortables are spending 150% more per person per week on leisure activities than The Minimums.
The potential impact of that spending power on a life well-lived is captured in this quote:
It is really important for mental health and everything as well isn’t it? So you know even day classes or evening classes are everything. You don’t get much… I don’t think you get much less if you’re retired.
Interestingly this budget area hasn’t increased much over time. Perhaps that reflects more flexibility is possible within this category? Gym memberships can give way to running shoes and walking boots, for example.
Early Mr Money Mustache was a trailblazer in rethinking life’s riches so they don’t cost a packet.
I’m not sure anyone has replaced him in this respect? Let me know who I’m missing in the comments.
Tech tock
The social participation category also includes spending on technology – an ever-changing hit to our (increasingly digital) wallets.
DVD players are long gone, obviously. But streaming services are now considered an essential at every income level:
I was going to say it is for your mental health well-being as well, socially included because if you’re not able to watch Netflix you know a small series like that, I just feel that is you socially excluded as well.
Even Minimums now get a smart TV. Moderates and Comfortables get a better smart TV.
(We were warned against this escalation in the movie Trainspotting. Perhaps not the best source of retirement advice, but prescient.)
Interestingly, ‘cleverer’ home technology such as smart speakers and passive cameras is starting to creep into the budgets and anecdotes as more of a necessity.
One participant explained why she’d sorted out a smart speaker for her father:
A couple of months ago he did fall and had we set up in time he would have been able to call one of us because he couldn’t reach his mobile phone.
You can ask Alexa to phone so they are a good feature on that so they’re well worth the money to be honest.
This rings true: I have known pensioners with chronic health issues who love their smart speaker’s simplicity. They are also greatly reassured that they can use it to call for help.
The retirement living standards of tomorrow’s world
Every spending category gets a smartphone these days. If nothing else it’s a bit of brain training!
I say this with my tongue in cheek, after watching many a Boomer over the years staring at a smartphone for the first time like a caveman facing a mortgage loan application.
How long before the new Apple Vision Pro sneaks into the highest spending band and works its way through the income levels?
At well over £3,000 a pop… if you enjoy keeping up with technology trends and you aren’t keen on trade-offs, you’ll need to be a Comfortable spender at least.
“Hello Future Me”
Retirement is difficult to imagine until you get there. We plan it out on bland spreadsheets and struggle to relate our parents’ experience to our own.
Making it even harder is that friendship groups tend to be intra-generational. I know more about the trials of my elders via Monevator readers than I do from real-life.
That’s why I found the retirement thumbnails in this research so fascinating. It let me hear things that people don’t normally talk about.
So what have you got to say for yourselves? Please do flesh out the picture for all of us in the comments below.
Take it steady,
The Accumulator
P.S. We’ve completely updated the numbers, commentary, and quotes above for the latest 2023 figures. Some comments below may refer to 2021’s figures. Others offer a timeless perspective, so do dig in!
- Financial Independence Retire Early. [↩]
- The PLSA is a financial industry group. It includes asset managers, consultants, law firms, and fintechs. They’re so keen to get Britain saving for retirement that they commission research from Loughborough University’s Centre for Research in Social Policy. [↩]
- Disposable income is what’s left after direct taxes, such as Income Tax, National Insurance, and Council Tax. [↩]
