2 June 2026 · Retirement Planning
Most retirement spending estimates are wrong because they ignore how spending changes with age. Here's a realistic framework for calculating what you'll actually spend in retirement.
The hardest number in retirement planning isn't the investment return or the withdrawal rate. It's the spending estimate.
Get the spending wrong and every other calculation is built on a bad foundation. Overestimate it and you'll work longer than you need to. Underestimate it and you'll run out of money.
The good news: there's a simple framework that gives you a realistic estimate in 30 minutes — and it's almost certainly more accurate than the "70% of pre-retirement income" rule you've probably heard.
The conventional wisdom says retirees need 70–80% of their pre-retirement income. This is a population average, not a personal prediction. It's often wrong in both directions:
Your actual number depends on your spending, not the average.
Retirement spending is not flat. Research consistently shows a "U-shaped" or "smile" pattern:
Phase 1 — Go-Go Years (60s)
High activity spending. Travel, experiences, hobbies, home improvements. Spending is often at or above pre-retirement levels.
Phase 2 — Slow-Go Years (70s)
Lower discretionary spending. Travel slows. The big-ticket projects are done. Spending typically drops 10–20% from the peak.
Phase 3 — No-Go Years (80s+)
Activity spending falls further, but healthcare and care costs rise. Net spending can rise or fall depending on care needs.
A flat spending assumption misses these phases and either over-prepares (annoying but manageable) or under-prepares (dangerous).
Want to know your exact retirement number?
Run your numbers in RetireGauge →Work through each category using today's prices. We'll adjust for inflation later.
Housing
Food
Transport
Healthcare
Leisure and travel
Family
Insurance and financial
Miscellaneous
| Category | Monthly | Annual |
|---|---|---|
| Housing (mortgage-free) | £600 | £7,200 |
| Food | £700 | £8,400 |
| Transport (one car) | £400 | £4,800 |
| Holidays (two per year) | £500 | £6,000 |
| Healthcare | £150 | £1,800 |
| Leisure and dining | £350 | £4,200 |
| Family and gifts | £200 | £2,400 |
| Insurance | £150 | £1,800 |
| Miscellaneous | £250 | £3,000 |
| Total | £3,300 | £39,600 |
This is a comfortable but not lavish retirement for a UK couple with no mortgage. Note: no car finance, no private school fees, and a modest holiday budget. Some months will be more, some less — but £39,600 is a defensible annual average.
Want to know your exact retirement number?
Run your numbers in RetireGauge →The budget above is a spending budget, not an income need. To know how much gross income you need, you have to work backwards from tax.
In the UK:
For a couple, this means up to £25,140 can be withdrawn from pensions tax-free annually (using both personal allowances). ISA withdrawals on top of that are also tax-free.
With careful structuring, a couple spending £40,000/year could pay very little income tax on their retirement income. But you need to calculate this specifically for your accounts and income sources.
If you budget £40,000/year at today's prices and inflation averages 3% over 20 years, you'll need £72,000/year in nominal terms to buy the same things.
Your portfolio needs to account for this — which is why good retirement calculators model real (inflation-adjusted) returns rather than nominal returns.
A common mistake is planning in nominal terms and forgetting that £40,000 in 2040 buys significantly less than £40,000 today.
The most unpredictable retirement spending category is late-life care.
In the UK, means-tested care funding kicks in when assets fall below certain thresholds — but above those thresholds, care costs are private. Residential care in England averages £35,000–£50,000/year. Nursing care can exceed £60,000.
A strategy many financial planners recommend: set aside a separate "care contingency" outside the main retirement portfolio — earmarked if needed, or left to estate if not. Some people buy long-term care insurance; others simply hold additional capital.
This is one area where professional financial advice pays for itself.
A good retirement spending calculator lets you model:
RetireGauge lets you model your exact spending against your savings trajectory, with country-accurate tax and a single readiness score that tells you where you stand.
According to the PLSA (Pensions and Lifetime Savings Association), a "moderate" retirement lifestyle for a couple costs about £34,000/year (around £2,830/month), and a "comfortable" lifestyle costs about £54,500/year (around £4,540/month). Singles need somewhat less. These are averages — your actual needs depend entirely on your lifestyle, location, and whether you have a mortgage.
A realistic starting point for a UK retiree without a mortgage is £1,500–£2,500/month for a single person, or £2,500–£4,000/month for a couple, depending on lifestyle. This covers basic living costs comfortably but allows significant variation based on travel, family support, and activities.
Generally yes in the middle years of retirement, then it may increase again in late retirement due to healthcare and care costs. This "retirement spending smile" or "U-shape" is well-documented in retirement research. Planning with flat spending often results in unnecessarily high savings targets for the early and middle years.
In the UK, NHS healthcare is free regardless of age. Budget for dental (around £300–£500/year), optical (£150–£300/year), and private prescriptions if applicable. If you want private health insurance for faster access to consultants and elective procedures, budget £100–£200/month for a couple. In the US, healthcare is the largest retirement expense for many people — private insurance before Medicare kicks in at 65 can cost $800–$2,000/month.
Yes — for most people, early retirement (60s) is when spending is highest. You're healthy, you have time and energy, and you may be doing the travel and experiences you deferred while working. Budget generously for the early years and more conservatively for the mid-retirement years.
Answer a few questions about the life you want — RetireGauge gives you a single readiness score and the exact income or age that funds it.
Try the calculator →