Anyone planning for financial independence (FI) knows it’s hard to picture your life in retirement. Like a precog from Minority Report, you can only glimpse fragments of your future.
However we’ve uncovered intriguing research that might help you fill in the ‘Here Be Dragons’ gaps in your FI map.
The research – Retirement Living Standards in the UK in 2021 – plots three tiers of retirement spending, ranging from minimal to moderate to comfortable.
The paper also serves up insights into what kind of lifestyle that spending really buys, from people already living it.
Much ado about much more than nothing
Retirement research gives you a shortcut to answering that perennial awkward cocktail party question: How much do I need to retire?
Okay, maybe it’s only us who invites those sorts of questions…
An unexpected bonus of the research is it also incorporates 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.
It tells us something about what really matters to people in retirement. And as ever, the experience of others might help us find our own path.
Plus it’s an interesting read because there’s nowt so queer as folk.
OK, let’s start with the hard data. We’ll then move on to the fluffy anecdotal evidence.
Retirement income standards 2021
This table is a bronze, silver, and gold rostrum of annual retirement incomes – as determined by members of the UK public aged 55 or older.
The underlying research explains what you get for your money at each level. We’ll come to that shortly but – spoiler alert – the Minimum lifestyle isn’t factoring in many trips to Ayia Napa.
What’s also not clear from the table is the income numbers are after-tax.
The median retired household income is £23,557, according to the ONS. That’s well below the Moderate spending level for couples in this 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 the single biggest reason why nobody should fear the State Pension being done away with. The social fallout of scrapping the State Pension would be catastrophic for any government.
What really leaps out from the table is how expensive life is 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 ‘em healthy. Give flowers, not chocolate. (But think twice before buying them a Peloton!)
The table also invites us to compare our own retirement prospects with the PLSA’s pecking order.
To understand the life of Riley promised by each level, feast your eyes on the next table…
What you get for your money
There is much social division written into the curt lines above.
For example, I struggle to imagine life without a car. Then again I don’t need three weeks in Europe per year.
I also 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.
Meanwhile our overall budget is closest to the Moderate camp, albeit we undershoot.
Retiree vox pops
What I love about this research isn’t the numbers, however. It’s the voices.
The participants discuss their lived experience for each major spending category.
A portrait thus 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.
The snapshot above shows the foodie living standard each income band affords. The major difference is eating out and takeaway:
- Minimums: £45 per month
- Moderates: £200 per month
- Comfortables: £533 per month
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 is uncovering ways to enjoy life without throwing money at it.
In my 20s I spent like The Comfortables on eating out. It was how I lived the life. Now I’m under-spending The Minimums and I’m happy with that.
Others will think differently. Social eating has shot up the priority list of many after lockdown, as encapsulated by this quote:
I hadn’t realised how important it is for emotional well-being and so on, just the act of sitting down and breaking bread with friends and family, so … I guess what I’m saying is I think that … once Covid has finished, that’s going to go up because a lot of people have realised how important it is.
Moreover, financial flexibility is an important part of social inclusion:
…at one time eating out would have been seen as luxury but to have … take part in society and be … have a reasonable standard of living, you would have to include things like this, wouldn’t you because it’s … not … essential’s the wrong word but it’s part of what it is to be in a modern society isn’t it?
As a lean-FIRE-ee I sometimes wonder if I’ve cut my cloth too tight on this score. We’ll see.
Minimums pay social housing rent. Moderates and Comfortables are assumed to have paid off their mortgages by retirement.
But today’s retirees don’t think the next generation will be so fortunate:
I was just going to say that in my experience at least, the expectation of certainly people in their 30s and 40s, which my kids and nephews and niece and so on all are, very few of them have an expectation now that they will own their house by time they’re 50 or 60.
Personally, I think we’ve fallen short as a country on this. It’s the height of hypocrisy to hoover up housing stock and lock future generations out of the market by failing to build.
The Generational Compact is a cornerstone of society. Earlier generations invest in their children’s future, and their children look after them in old age.
But we’re creating generational divides that put social cohesion at risk.
Meanwhile, up-and-coming generations are meant to bankroll the NHS, long-term care, State Pensions, and clean 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:
…the thing is though I’m in a position where for lots of reasons I… I have to rent, so I have to share a house with somebody… you can’t always guarantee that you’re going to end up owning your own house because circumstances change and things happen don’t they, and people get divorced and have to split their resources and all that sort of thing, and more and more people get divorced after retirement because the fact is when people suddenly find they’ve got to spend a lot of time together…
Divorce is sometimes mentioned in Monevator comments as a third-party calamity. But reading a first-hand account really drove home the awfulness of the situation to me. (Excuse me while I google ‘thoughtful gifts’.)
Speaking of unhappy endings that I’d rather not think about…
Body disposal etiquette
I’ve paid scant attention to funerals. But our focus-grouped retirees have, and they’re very pragmatic:
I think for me, a funeral you know is my party that I’m not actually attending, except (laughs) in a dead fashion! And I’d rather spend the money on you know allowing people to have a good time, without all that money spent at the Co-op, on a box which is just going to be burnt.
I think it’s a logical extension of the country’s descent into … or ascent, depending on your perspective, into being agnostic or atheist that you know it’s the last pillar that’s being kicked away in terms of you know the death ceremony and some official presiding at it, and you just don’t … you don’t need that anymore.
Worst case scenario, you can just donate your body to science and you’re not paying for anything at all, are you?
The retirees have built pre-paid cremation plans into the Moderate and Comfortable budgets. But they’re also tempted by adverts for services that skip the church, cars, and wake.
Thankfully those ads aren’t showing up on my feed yet.
Mrs Accumulator is under instruction to pop me out with the bins. She says she will put me in the freezer so she can still chat to me.
We’re gonna need a bigger freezer.
In another ominous sign of the times, some contributors voiced their fears about being able to get medical treatment when they need it.
[A] health plan is probably becoming a necessity, it’s certainly something that I have started actively worrying about … getting any kind of appointments with GPs, dentists, and when you hear about the long, ever increasing waiting lists for NHS, it’s certainly playing on my mind…
I suppose it’s just the way I’ve been brought up, but I’ve always thought of private healthcare as a luxury. It may be that the situation, the circumstances for all of us are changing so that that needs to be revisited…
Mrs Accumulator and I had the same conversation, triggered by the Covid deluge.
Ultimately, private healthcare wasn’t included in the retirement budgets this time around 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? Do we help relieve the burden on the NHS by looking after ourselves more? (By which I mean living healthier lifestyles that increase our chances of staving off chronic conditions.)
All the private health insurance in the world won’t save us from dying if we need urgent medical assistance but have to wait five hours for an ambulance.
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:
Sociability is such an important factor for well-being … sociability and connection and belonging, which is so important for mental health and continuing…
That said, the interviewees also talk about how Covid has forced a reassessment of spending needs in this area. For example, gym memberships have given way to running shoes, bicycles, and walking boots.
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 that respect? Let me know who I’m missing in the comments.
The social participation category also includes tech. DVD players are clinging on but streaming is now considered an essential part of engaging with the world at every income level:
My partner, her quality of life would not be the same if she didn’t have Netflix … So these things … as I said, these things were a luxury but then they become a necessity in certain circumstances, don’t they?
Moderates and Comfortables get a smart TV. Comfortables get a bigger smart TV.
(We were warned against that escalation in the movie Trainspotting. Possibly not the best source of retirement advice.)
The contributors are prone to lifestyle creep:
…the other thing I’d say on your list is that at one time, HD TV was kind of like an exotic upscale from standard definition, but now HD is just very basic, and now 4K is becoming a minimum. So I’d say that you’re not far off now where 4K will be just your minimum and HD is already looking a bit old-fashioned.
That person is a marketeer’s wet dream. At some point your eyes can’t tell the difference! And your well-being certainly won’t.
Smart speakers are now included for Comfortables but not yet Moderates.
I do wonder how much tech is bought just because the neighbour’s got one?
Some retirees I know would be much better off if they could just get to grips with a smartphone.
I say this with my tongue in cheek after watching many a Boomer respond to a smartphone like a caveman faced with a mortgage loan application.
On the other hand, I know a pensioner with chronic health issues who loves their smart speaker’s simplicity. They’re also greatly reassured that they can use it to call for help.
I’m sure there’ll be tech in the future that passes me by. Hell, there is now.
Regardless, if you enjoy keeping up with trends and aren’t keen on trade-offs, you should be planning for the Comfortable spending band.
“Hello Future Me”
Retirement is difficult to imagine until you get there. We plan it on colourless spreadsheets and emotionally struggle to relate our parents’ experience to our own.
Friendship groups tend to be intra-generational. I probably know more about the trials of my elders via Monevator 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? Let us know below.
Take it steady,
P.S. If you don’t like the PLSA’s retirement income numbers then try the ones from Which instead.
- 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 commissioned 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. [↩]