The dream of a comfortable retirement is getting harder to reach, thanks to rising living costs. A new study by the Resolution Foundation, working with the Living Wage Foundation, shows that the amount of money people need to save for their retirement has jumped by 60%. To have a basic standard of living in retirement, people now need nearly £110,000, compared to just £68,300 two years ago. So, what’s behind this sharp increase, and what does it mean for future retirees?

How Much Do You Need to Retire?

The cost of living crisis is the main reason for this massive jump. Everything is getting more expensive, from groceries to electricity bills, making it harder for retirees to cover their basic needs. The research found that an average retiree needs about £19,300 a year to live comfortably. However, this amount can vary depending on whether you are single or in a couple, and whether you own your home or rent.

For example, a single pensioner who owns their home needs around £13,500 a year, which comes to about £258 per week, to cover the basic costs. Meanwhile, a couple who owns their home needs about £20,600 a year, or £395 per week, to meet their needs. The situation is even tougher for those who don’t own their homes. Single pensioners who rent privately need around £20,400 per year, which is £6,900 more than those who own their homes.

Why Are the Costs So High?

The rise in living costs has made it difficult for people to save enough for their retirement. The cost of groceries, gas, and electricity has gone up, pushing the required pension pot to nearly £110,000. This figure is calculated by looking at what’s needed to top up the full state pension so that retirees can have at least £19,300 annually to cover their basic needs.

The study also looked at other factors like relationship status, housing situation, gender, and life expectancy. These factors all affect how much money someone will need to save. The bottom line is that, for most people, the amount they need to have saved to retire comfortably is much higher than it used to be.

How Can People Save Enough?

Saving enough for retirement isn’t easy, especially for those earning the real living wage. For example, people aged 25 to 35 need to save between 9% and 15.2% of their earnings if they want to have enough by the time they reach retirement age. However, how much they actually need to save depends on how many hours they work, how long they plan to work, and when they started saving.

Let’s take Katie’s story as an example. She currently rents from a housing association and is worried about her future. “I’m dreading retirement,” she says. “I don’t want to work until I drop, but it’s looking more likely because I can’t save much right now. My rent has increased by around £28 a month, or £336 a year, just when I’m trying to get back on my feet.”

Katie was made homeless from private rented housing just before the pandemic and now lives in housing association accommodation. “I save far less than I’d like, and it’s going to take me years to feel financially secure and ready for anything life throws at me,” she adds.

What Can Be Done?

The rising cost of living means many people are struggling to save enough for their future. The situation calls for action from both individuals and policymakers. Workers need better wages and more affordable housing options. Governments should consider creating policies that help people save more, like improving access to affordable pension plans or offering tax breaks to those who save for retirement.

At the same time, individuals can take steps to plan for their future. Starting to save early, even if it’s just a small amount, can make a big difference over time. It’s also helpful to review your finances regularly, cut unnecessary expenses, and make sure you are getting the most out of any workplace pension schemes.

The Reality of the Situation

In the end, the dream of a comfortable retirement is looking more like a challenge for many people. The ongoing cost-of-living crisis has made it harder for everyone, especially those earning lower wages or dealing with unstable housing. The amount needed for a basic standard of living in retirement has increased dramatically, leaving many worried about what lies ahead.

While it may seem overwhelming, planning ahead and seeking financial advice can help. Every small step towards saving today can lead to a better, more secure tomorrow. So, don’t wait until it’s too late — start thinking about your future now, and take the steps you need to make your retirement dreams come true, even in tough times.