How long will my money need to last?
Alongside the factors that have already been mentioned (namely lifestyle and expenses), you’ll also need to give some thought to how long your retirement is going to be. This will ultimately depend on when you plan to stop working and your life expectancy.
While life expectancy is something no one can predict, it’s clear that the longer your retirement, the more money you’ll need in your pension pot to sustain a comfortable lifestyle. For example, if the value of your pension pot is £300k, and your retirement is 10 years, that’s £30k a year. However, if your retirement is 30 years, that’s £10k a year.
A luxurious retirement may be more important to you than a long one, but you don’t want to use up your money too quickly and risk not having enough later on. On the other hand, you don’t want to restrict your finances more than you need to.
It’s also worth thinking about how inflation will affect how much money you’ll need to live on, as well as how long your savings will last. With this in mind, you may want to consider leaving some of your pension pot invested, so that it can continue to grow even after you start taking money from it.
Knowing how much of your money to keep invested and how much to take as income can be complicated, which is why it’s sensible to seek financial advicebefore making a decision.
It's important to remember that any investment comes with risk. All investments can go down as well as up, and you may get back less than you invest.
