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How much money do you need for a happy retirement?

October 2024 Helpful resources

The happiest retirees have an average total monthly income of £1,700. To get at least that much a month, and assuming you retire at 67, you’ll need to:

  • have a pension pot of about £222,000
  • be eligible for the full State Pension, which is currently £958.53 a month

If either of those don’t apply to you, you might have other assets or income sources you could draw on.

How did we work that out?

Our happy income figures

The £1,700 a month figure comes from a joint study we’ve put together with the Happiness Research Institute. It’s an independent Danish think tank focusing on wellbeing, happiness and quality of life.

We combined our own financial expertise with the Happiness Research Institute’s wellbeing knowhow. They measure happiness using guidelines and benchmarks from the Organisation for Economic Co-operation and Development and United Nations.

Our joint report studied the lives of 3,000 retirees. We explored a range of different wellbeing measures for people in later-life, like social connections, health and of course income. Financial status turned out to be the most important factor.

Meik Wiking, the Happiness Research Institute’s CEO, commented:

“The study shows that money does indeed matter for happiness. In fact, money plays a crucial role. Being without sufficient resources to make ends meet causes worry and stress and a lower quality of life for people in the UK. That is especially the case for people in retirement. The good news is that there are ways we can improve happiness levels by planning and saving for retirement.”

We also found that the boost higher incomes bring begins to level off once you’ve got more than about £2,000 a month coming in.

And one final, very important point. These monthly income figures exclude any housing costs – they apply to homeowners who’ve paid their mortgages off. If you do have any housing costs, you’ll need to add them to the £1,700 to get the equivalent income you’ll need.

Our retirement income figures

Our figures are an estimate – they’re meant to give you a general sense of how much you could need. They’re not a specific prediction. To get to them, we assumed that you retire at 67 and: 

  • spend about £222,000 on a single life pension annuity with a five year guarantee and no death benefits
    • this could either be the full amount of your pension pot or what’s left over after you take some or all of your 25% tax-free lump sum out of it
  • get the full State Pension 

At current annuity rates, those two combined should give most people an after-tax income of about £1,700 a month*.

We say “should” because the exact annuity income you’ll get is difficult to predict. Annuity rates go up and down as the markets change. The actual amount you’re offered will also depend on your personal circumstances, and the provider, product and options you choose. And if you don't set up a retirement income that rises with inflation, in real terms its value will go down over the years.

If you want to see how that could work out for you, you can:

  • check to see if you’re eligible for the full State Pension at the gov.uk site

Is your income all that matters?

No. Other factors, like social connections and good health, are also vital to staying happy as you age. We found that, as well as a good income, the happiest retirees were also more likely to be satisfied with their:

  • day-to-day routines
  •  amount of free time
  • relationships with family and friends
  • general social lives

They were also much less likely to report severe loneliness.

But as Lorna Shah, our Retail Retirement MD and Home Finance CEO, said: “While strong social connections and good health play a vital role in a rewarding retirement, the study shows having a predictable income is key to unlocking the other elements of life that make us happy.”

How can I make sure I’m saving enough for a happy retirement?

  • Our tools and guidance can help you check to see if your savings are on track to support a happy retirement. They’ll also help you explore your different income options.

If you’re nearing retirement and worried that you’re not saving enough:

  • it’s worth seeing if you can start putting away just a bit more every month. Every little helps! Even a little savings boost now can make a difference later on.
  • you could explore other sources of income. For example, if you own your home, equity release or just downsizing could help. And don’t forget to factor in the State Pension!

*Based on Hargreaves Lansdown's average annuity rates at July 2024 for a person aged 65-70 with a £100k pension pot buying a pension annuity with a five year guarantee period.