What does a ‘comfortable’ retirement cost?

A useful starting point is your expected expenses and the lifestyle you want.

Pensions UK’s Retirement Living Standards show how much you might spend each year in retirement, across three levels of living:

• Minimum: £13,900 a year single, £22,500 couple
• Moderate: £32,700 a year single, £45,400 couple
• Comfortable: £45,400 a year single, £62,700 couple

They are based on what people think is needed for different lifestyles, and give examples of what life in retirement could look like at each level. The figures assume you own your home outright.

On its own, £250,000 won’t fund a comfortable single retirement for long. Combined with the State Pension and careful planning, it could support a moderate lifestyle.

How long will your money need to last?

A 65-year-old today could live into their late 80s or beyond. Plans often need to stretch 25–30+ years.

The real challenge is making your money last as long as you do.

How much can you safely withdraw?

Your withdrawal rate determines how long your pension pot lasts. Working out a sustainable rate isn’t straightforward, it depends on several factors, including other income sources in retirement, the mix of your pension investments, your spending needs, and market conditions early on.

Poor returns early in retirement can do lasting damage, known as sequencing risk.

The ‘4% rule’ is a useful starting point: withdrawing around 4% in year one works out to roughly £10,000 on £250,000. On its own, this is unlikely to cover a minimum retirement lifestyle (£13,900), but supplemented by the State Pension, it could.

For most people, a fixed withdrawal rate won’t suit their plans, as spending patterns change over time. The 4% rule is best treated as a starting point rather than a fixed target. A flexible, reviewed approach tends to work better, and this is where a financial planner can help, with a plan built around you.

Staying invested in retirement

Cash alone is eroded by withdrawals and inflation, so most pots stay invested through retirement. Equities offer more growth potential but more volatility; bonds and cash offer stability but lower returns. Many retirees blend the two, often keeping a cash buffer so they’re not forced to sell at a loss during downturns.

How your pension is taxed

Up to 25% of a pension can typically be withdrawn tax-free, up to £62,500 on a £250,000 pot. This is capped across all pensions by the Lump Sum Allowance, currently £268,275.

Tax-free cash doesn’t have to be taken all at once, withdrawing it in stages can be more tax-efficient. Everything beyond the tax-free portion is taxed as income, alongside other income such as the State Pension.

Why inflation matters more than you think

Inflation gradually erodes purchasing power. At 3% average inflation, prices roughly double over 24 years, meaning a comfortable income at 66 may buy much less by your mid-80s.

This is a key reason pots are often kept partly invested throughout retirement, rather than held entirely in cash.

Don’t underestimate the State Pension

The full new State Pension is currently £241.30 a week (around £12,548 a year), available with at least 35 qualifying years of National Insurance contributions. It’s guaranteed for life and rises annually under the triple lock.

For a couple both receiving the full amount, that’s over £25,000 a year in guaranteed income before touching a private pension pot.

The less you rely on your pot for essentials, the more flexibility you have to let it grow or ride out market downturns. It’s worth checking your State Pension forecast and filling any NI gaps if needed.

Getting expert help with your plan

£250,000 is unlikely to fund a comfortable retirement on its own, but a well-structured plan, with the right advice, could help you get more from your pension pot.

A financial planner can help by:

• Building a personalised retirement income strategy, taking into account the State Pension and other assets.
• Choosing an investment strategy suited to your plans, and reviewing it over time.
• Increasing pension contributions where possible to boost retirement income.
• Stress-testing your plan against downturns, inflation, and care costs.

A planner can’t guarantee outcomes, but can help your £250,000 work as efficiently as possible.

Please get in touch to book a free initial discussion with a qualified financial planner.

Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, to determine the risks associated with the investment and its suitability.