Can I Afford to Retire? How to Work Out Your Number

The one-minute version

Before you decide, know this

• Start with the income you want, not a pot. Work out the annual income your chosen lifestyle needs, then work backwards to the pot that funds it.

• The benchmarks are public. The PLSA Retirement Living Standards put a single person's comfortable retirement at around £45,400 a year in 2026, moderate at £31,300.

• The state pension is a foundation, not the answer. The full new state pension is £12,548 a year in 2026/27, which covers the minimum standard but falls well short of moderate or comfortable.

• A rough rule: multiply the income gap by about 25 for a drawdown pot, or check annuity rates. It is a starting estimate, not a guarantee.

• This is education, not advice. Nothing here is a personal recommendation. For a plan built around your circumstances, take regulated advice.

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Almost everyone approaching retirement carries the same quiet uncertainty. They have a sense that their pension should be, in the words I hear most often, “quite a lot,” but they have never sat down and calculated the specific pot needed to fund the specific life they want for the specific number of years they are likely to live. The question “can I afford to retire” feels too large and too frightening to approach head-on, so it gets deferred, year after year, until it answers itself by default. That is the worst way to settle the most important financial decision of your life.

It need not be that way, because the calculation is more approachable than the dread around it suggests. You do not need to predict markets or master actuarial tables. You need to do three things in order: decide what kind of retirement you want, find out what that costs, and work backwards to the pot that pays for it. This guide walks through each step with current, sourced UK figures, and gives you a method to reach your own number in an afternoon. It will not make the decision for you, but it will replace a vague fear with a real figure, which is the whole point.

Start with the life you want, not the pot

The common mistake is to begin with the pot, staring at a pension balance and wondering whether it is enough, without first defining what “enough” means. That is backwards. A pot of £400,000 might be ample for one person and inadequate for another, depending entirely on the life each intends to lead. So begin at the other end. What does the retirement you actually want cost to run for a year?

This is a question about your life, not your portfolio. Do you own your home outright, or will you still have housing costs? Do you want two foreign holidays a year or none? A newer car, or no car? Eating out weekly, or rarely? These choices, not the stock market, determine your number. The pot is simply whatever it takes to fund the answer. Get the lifestyle figure right and everything else is arithmetic.

Start with the life you want, then work backwards to the pot. A pension balance means nothing until you know what it has to pay for.

What retirement actually costs in 2026

You do not have to guess at the lifestyle figure, because rigorous independent benchmarks exist. The Pensions and Lifetime Savings Association, working with Loughborough University, publishes the Retirement Living Standards, based on detailed research into what retirees genuinely spend. They define three tiers, and they are updated annually for rising prices. The figures below, for a single person outside London, reflect the June 2026 update. [1]

Table: PLSA Retirement Living Standards, single person, outside London, 2026. Updated annually; confirm current figures.

• Standard: Minimum — Income a year: ~£14,400 — What it broadly buys: Basic needs covered, home owned outright, little for holidays or a car

• Standard: Moderate — Income a year: ~£31,300 — What it broadly buys: More security, a two-week European holiday, eating out, a small car

• Standard: Comfortable — Income a year: ~£45,400 — What it broadly buys: Long-haul holidays, a newer car, home improvements without anxiety

For a couple the totals are higher but the cost per person is lower, because housing and many living costs are shared. The comfortable standard for a couple sits around £62,700 a year in the 2026 figures. [1] Two points are worth holding onto. First, these assume you own your home outright; if you will still be paying rent or a mortgage, add that cost on top, and it can be substantial. Second, they are a guide, not a goal. Two retirements with the same headline number can feel very different depending on health, where you live and what you enjoy. Use the standard that matches the life you actually want, then adjust it for your own circumstances.

What the state pension covers, and what it does not

Before working out what your own savings must provide, subtract the part the state covers, because for most people the state pension is the single most valuable guaranteed income they will ever receive. For 2026/27 the full new state pension is £241.30 a week, which is £12,548 a year, after the 4.8 percent triple-lock rise in April 2026. [2] You need around 35 qualifying years of National Insurance to receive the full amount, and at least ten years to receive anything.

Set that against the standards and the gap is plain. The full state pension roughly covers the minimum standard on its own, but it falls well short of moderate and barely reaches a third of comfortable. [1] This is the entire reason workplace and private pensions matter: the state provides a floor, and your own savings must build everything above it. One timing point matters too. The state pension is payable only from state pension age, which is rising to 67 between April 2026 and April 2028, whereas you can normally access a private pension from 55, rising to 57 in 2028. If you retire before state pension age, your own savings must cover the whole cost until the state pension begins.

The gap your own savings must fill

Now the arithmetic becomes concrete. Take the income your chosen lifestyle needs, subtract the state pension you expect, and what remains is the gap your own pensions and savings must generate every year. For a single person targeting the comfortable standard, the sum looks like this.

Table: The annual income gap, single person, 2026 figures. Your own numbers will differ.

• Target lifestyle: Moderate — Income needed: £31,300 — Less state pension: £12,548 — Gap to fund yourself: ~£18,750

• Target lifestyle: Comfortable — Income needed: £45,400 — Less state pension: £12,548 — Gap to fund yourself: ~£32,850

That gap, the annual income your own money must produce, is the figure everything else hangs on. It is far more useful than any pot size in the abstract, because it tells you exactly what your savings have to do. The next step is simply to work out how large a pot generates that income.

Turning a yearly income into a pot

There are two main ways to convert savings into retirement income, and they imply different pot sizes for the same income.

The drawdown approach and the 4% guide

If you keep your pot invested and draw an income from it, a long-standing rule of thumb suggests that withdrawing around 4 percent of the starting pot a year, rising with inflation, gives a reasonable chance of the money lasting roughly thirty years. To find the pot, divide the income gap by 4 percent, which is the same as multiplying by 25. A £32,850 gap implies a pot of around £820,000; an £18,750 gap implies around £470,000. The 4 percent figure is a guide, not a guarantee: it came from historical US data, it is debated, and a poor run of early returns can undermine it. Treat it as a sensible starting estimate to be stress-tested, not a promise.

The annuity approach

Alternatively you can buy an annuity, exchanging your pot for a guaranteed income for life. This removes the risk of running out but ties you to the annuity rate available when you buy. On the PLSA's own illustrative figures, a single person needed a pot of roughly £540,000 to £845,000 to fund a comfortable retirement through an annuity alongside the state pension, the wide range reflecting how much annuity rates vary. [3] Which approach suits you depends on your appetite for risk, your other income, and how much you value certainty over flexibility.

A rough-and-ready rule

For a quick estimate of the drawdown pot you need: take your target annual income, subtract the state pension, and multiply what is left by about 25. It is the back of an envelope, not a financial plan, and it ignores tax, investment risk and your own circumstances. But it turns a vague worry into a number you can actually work with, which is where every real plan begins.

Calculate your own number, step by step

Here is the afternoon's work that turns dread into a figure.

Step one: pick your lifestyle figure

Choose the PLSA standard closest to the life you want, single or couple, then adjust it. Add housing costs if you will not own your home outright. Add or trim for the holidays, car and habits you actually intend. Write down one annual income figure.

Step two: subtract your expected state pension

Check your state pension forecast at gov.uk, since the full amount depends on your National Insurance record. Subtract that figure from your lifestyle income. What remains is your annual gap.

Step three: convert the gap into a pot

For a drawdown estimate, multiply the gap by 25. For an annuity, look up current annuity rates or use the PLSA's illustrative range. This gives you the target pot.

Step four: compare with what you have and are building

Add up your current pensions and relevant savings, and project forward what your contributions and growth might add by your planned retirement date. Compare that with the target pot. The gap between them, if any, is what your plan has to close, by saving more, working a little longer, adjusting the lifestyle, or some combination.

Where the rough number stops being enough

This method gives you a serious estimate, not a financial plan. It does not handle tax on withdrawals, the order in which you draw from pensions, ISAs and other savings, the risk of a bad run of returns early in retirement, or how your spending may change with age and health. Those are exactly the areas where regulated advice earns its keep. Use your number to start the conversation, not to end it.

The early-retirement bridge

If you hope to stop work before state pension age, there is an extra problem the headline figures hide: the bridge. Between the day you retire and the day your state pension begins, you receive nothing from the state, so your own savings must cover the entire cost of those years, not just the gap above the state pension. Someone retiring at 60 with a state pension age of 67 must self-fund seven full years before the state contributes a penny.

That has two consequences. The pot needed for early retirement is meaningfully larger than for retiring at state pension age, because it must carry more years and a heavier early load. And the access rules bite: you can normally reach a private pension only from 55, rising to 57 in 2028, so anything spent before then must come from ISAs or other non-pension savings. Early retirement is achievable, but the arithmetic is less forgiving, and it is an area where a proper plan, and usually advice, repays the cost many times over.

This is education, not advice

This guide explains how to estimate whether you can afford to retire. It is general information, not a personal recommendation, and it cannot account for your circumstances. The rules of thumb here are starting estimates, not guarantees, and they ignore tax and investment risk. Figures are sourced and dated below and change over time. For a plan built around your situation, consult an authorised financial adviser.

Frequently asked questions

How much do I need to retire in the UK?

It depends on the life you want. The PLSA Retirement Living Standards put a single person's comfortable retirement at around £45,400 a year in 2026, moderate at £31,300, and minimum at £14,400. Subtract the state pension and multiply the remaining gap by about 25 for a rough drawdown pot. Your own figure depends on your lifestyle, housing costs and other income.

How much is the state pension in 2026?

The full new state pension for 2026/27 is £241.30 a week, which is £12,548 a year, after the 4.8 percent triple-lock increase in April 2026. You need around 35 qualifying years of National Insurance for the full amount. Check your own forecast at gov.uk, as it depends on your record.

What pot do I need for a comfortable retirement?

As a rough guide, a single person targeting the comfortable standard of around £45,400 a year, less the state pension, needs to fund a gap near £32,850 a year. On the 4 percent drawdown guide that implies a pot of roughly £820,000; the PLSA's annuity illustrations suggest a range of around £540,000 to £845,000. These are estimates, not guarantees, and your figure will differ.

What is the 4% rule?

It is a rule of thumb suggesting you can withdraw about 4 percent of your starting pot in the first year, then increase that amount with inflation, with a reasonable chance of the money lasting around thirty years. It came from historical US data and is debated. A poor run of returns early in retirement can undermine it, so treat it as a starting estimate to stress-test, not a promise.

Is the state pension enough to live on?

On its own it roughly covers the PLSA minimum standard but falls well short of moderate and reaches only about a third of comfortable. For most people it is a foundation that workplace and private pensions must build on, not a complete retirement income.

When can I retire?

You can normally access a private pension from age 55, rising to 57 in 2028. The state pension comes later, at state pension age, which is rising to 67 between April 2026 and April 2028. If you stop work before state pension age, your own savings must cover the whole cost until it begins.

Can I retire early, and what changes?

Yes, but it is harder, because you must self-fund the years before your state pension starts, and you can only reach a private pension from 55, rising to 57. Anything spent before then must come from ISAs or other savings. Early retirement needs a larger pot and a careful plan, since the arithmetic is less forgiving.

Should I use drawdown or an annuity?

Drawdown keeps your pot invested and flexible but carries the risk of running out or of poor early returns. An annuity gives a guaranteed income for life but ties you to the rate when you buy and is less flexible. Many people use a mix. Which suits you depends on your appetite for risk, your other income and how much you value certainty.

Does the comfortable figure include housing costs?

No. The PLSA standards assume you own your home outright. If you will still be paying rent or a mortgage in retirement, add that cost on top of the standard, and it can change the picture substantially. Always adjust the benchmark for your own housing situation.

Do I need a financial adviser to plan my retirement?

You can estimate your number yourself with the method here, and that is a valuable starting point. But the harder parts, tax-efficient withdrawals, sequencing income across pensions and ISAs, managing the risk of a bad early run, and early-retirement bridging, are where regulated advice earns its cost. Use your estimate to begin the conversation.

Sources

• [1] PLSA Retirement Living Standards, single-person figures for a comfortable (~£45,400), moderate (~£31,300) and minimum (~£14,400) retirement, and ~£62,700 comfortable for a couple, per the PLSA update reported June 2026 (Rest Less; PLSA via PoundSense and Pension Bible, 2026). Figures assume the home is owned outright and exclude London.

• [2] Full new state pension for 2026/27 of £241.30 a week, £12,548 a year, after the 4.8% triple-lock rise in April 2026 (House of Commons Library briefing CBP-10403; Standard Life; Age UK, 2026).

• [3] PLSA illustrative pot range of roughly £540,000 to £845,000 for a single person's comfortable retirement via an annuity alongside the state pension, the range reflecting annuity rates of £5,000 to £7,500 per £100,000 (Rest Less, citing PLSA, June 2026).

Figures verified June 2026 against the sources named. Living standards, state pension rates and annuity rates change over time; confirm current figures at gov.uk, retirementlivingstandards.org.uk or with a regulated adviser before relying on them.