How to calculate how much you need in retirement
Your retirement number is the lump sum that can fund your life after subtracting secure income and stress-testing for inflation, longevity and market shocks. Getting it right begins with your spending, not a rule of thumb.
- Price your lifestyle by life stage. Write three budgets in today’s money: go-go (high activity), slow-go (quieter travel, rising healthcare), no-go (care and essentials).
- Subtract guaranteed income. Include any defined benefit pension and expected State Pension.
- Index for inflation. Model realistic inflation for each stage, with healthcare rising faster than general prices.
- Solve for the pot. Capitalise the inflation-linked gap using cash-flow modelling, then test it against poor early market returns and currency swings if you will spend outside sterling. Use rebalancing rules, not guesswork.
- Review annually. Diversify properly, keep fees tight, and update the plan as life changes.
Last updated: 25 January 2026
Plan the retirement you want, without compromising quality of life
Retirement planning is not just a maths problem; it is a design project. The purpose of finding your number is to fund a great life. Use this section to shape an amazing retirement in practical steps and make sure the portfolio serves the life, not the other way round.
Start with a vivid vision, then price it
Write two pages on what a great year looks like. Be specific: where you live, who you see, how many trips, what hobbies, what you do on a perfect Tuesday. Then classify spending:
- Non-negotiables: essentials for your quality of life, for example visits to family, club memberships, private medical cover, a seasonal rental.
- Nice-to-haves: upgrades that make life richer, such as business-class on long flights, guided walking holidays, a personal trainer.
- Never-agains: habits you will happily drop, which release budget.
Put a sterling cost next to each item in today’s money and assign each to go-go, slow-go or no-go years. This encourages you to front-load experiences while energy and mobility are highest.
Build a joy-first budget
Turn the vision into a working budget that protects the items that matter most. Start with non-negotiables, then layer in nice-to-haves until you reach a level that still feels prudent. Add a 10 percent cushion labelled “spontaneity” so you can seize opportunities without guilt.
Calendar the plan
Make quality of life tangible. Map the next five years quarter by quarter: spring city breaks, a summer month in your chosen base, autumn learning goals, winter wellness and family gatherings. Give each a rough cost and assign it to a life stage. This becomes a spending schedule your portfolio can prepare for.
Design guardrails that protect lifestyle
Guardrails replace worry with rules:
- Floor: the minimum real income that covers non-negotiables.
- Band: a range for discretionary spending that flexes with markets.
- Triggers: if the portfolio falls by a set amount, pause big discretionary items; if it rises strongly, allow a modest upgrade or pre-fund next year’s travel.
Healthspan is lifestyle
Budget to sustain energy and mobility: annual health screening, private medical insurance where appropriate, fitness coaching or club access, and funds for preventive travel health. Treat these as investments, particularly in the go-go years, to extend them.
Why the “number” starts with spending, not markets
Investment returns matter, but the most powerful lever is the spending you intend to sustain. Start by writing three realistic, after-tax budgets in today’s prices. Anchoring on lifestyle first keeps the plan honest and avoids over- or under-saving.
The go-go, slow-go and no-go years
- Go-go (years 1 to 10 or so): higher travel and leisure, home projects, gifts, perhaps a car upgrade.
- Slow-go: fewer long-haul trips, more local experiences, healthcare and insurance trending up.
- No-go: spending compresses into essentials, housing, utilities and care. Big-ticket travel fades.
This pattern avoids the common mistake of assuming a flat spend for 30 years. It also helps you prioritise: the early years often deliver the best memories per pound.
Turning stages into a cash-flow
- Write the three annual budgets in today’s money.
- Layer in one-offs: relocations, weddings, helping adult children, home improvements, replacement cars.
- Identify secure income: DB pensions, State Pension and any annuities or rental income. DB schemes deserve special respect because they pay a guaranteed income for life, often with inflation linkage.
- Define the gap: what your portfolio must fund. The gap, not total spend, drives your number.
If you want a quick data point for planning, check your State Pension forecast and National Insurance record via the Future Pension Centre.
Inflation is the bill you must pre-pay
Inflation is not a single number. The retiree basket often behaves differently from headline CPI. Two workable approaches:
- Single inflation assumption for the whole plan, for example 2 to 4 percent, if you want simplicity.
- Category inflation where healthcare and care costs grow faster than general spending.
Whichever you choose, express budgets in today’s prices, then index them forward in the model. The behavioural benefit is real: you plan what you know, and let the software apply inflation.
Sequence risk and why timing matters
If markets fall early in retirement, selling too many shares at low prices can cause lasting damage. Dynamic spending rules help. After a poor year, trim discretionary withdrawals; after a strong run, consider small increases or refill cash reserves. A simple, pre-agreed rebalancing policy reduces drift and keeps risk within your rails.
From spending to pot size: a worked method
- Pick a start age (for example 65) and a longevity horizon that reflects family history and healthcare improvements.
- Calculate the gap in year one: spending minus secure income.
- Inflate the gap through go-go years, then flatten it, then allow for care costs later.
- Apply investment assumptions and run two sets of results:
- Solve for the pot that funds cash-flows with an acceptable success range, not a fixed “safe withdrawal rate”. Pair the result with guardrails that tell you when to nudge spending up or down.
Most retirees find this clearer than anchoring on an imported rule of thumb. It is also the right level of precision for cross-border lives.
The portfolio that supports the plan
Diversify like you mean it
True diversification spreads risk across assets, sectors and regions so different parts of the portfolio respond differently to shocks. A practical retirement mix typically includes global equities for growth, high-quality bonds for resilience, and cash or short-dated instruments for near-term spending. Some investors add listed property or factor tilts. Beware concentration in a home market you may never live in again.
Rebalance on purpose
After strong equity markets, portfolios drift riskier; after sell-offs, they drift safer. Rebalancing trims winners and tops up laggards to restore target weights, keeping risk in line with your plan and maintaining a repeatable discipline.
Match currencies to spending
If retirement costs are in euros or dirhams but income arrives in sterling, decide up front how you will handle currency. Holding part of the portfolio in your spending currency, or using explicit hedging for liabilities, reduces the chance that exchange rate swings derail your plan. Some international pensions can distribute income in multiple currencies.
Keep costs under control
Fees compound too, just in the wrong direction. High ongoing charges drag on net returns and can reduce the sustainable income your pot can support. Prefer clean, low-cost platforms and funds.
Optional wrappers you can use, without over-complicating
Some expats use an international portfolio bond to defer tax, rebalance without triggering gains during expatriation, and use the 5 percent cumulative allowance to shape cash-flows. If appropriate to your jurisdiction, this can improve the net outcome of the same diversified portfolio. Keep records and take advice before relying on these features - as they aren't tax favourably in every single jurisdiction.
What withdrawal policy works in the real world?
Fixed, unchanging withdrawal rates ignore volatility. A better approach uses guardrails:
- Set an initial income consistent with your risk capacity.
- Define a floor and ceiling for annual withdrawals in real terms.
- Cut back discretionary spending after a large market fall; consider modest increases after strong periods.
- Keep 12 to 24 months of essential spending in cash or very short-dated instruments so you are never a forced seller.
- Rebalance at set bands or dates to keep the asset mix on target.
This keeps spending flexible without feeling like permanent austerity.
Common pitfalls that inflate your number unnecessarily
- Ignoring currency alignment. Even good investment returns can miss the point if your liabilities are in a different currency.
- Letting costs bloat. An unnecessary 1 percent per year in fees can translate into a meaningful cut to sustainable income.
- Never consolidating. Multiple small pots often mean duplicate fees and fragmented strategy; modern platforms make consolidation straightforward for many people.
- Treating DB like just another asset. It is an income insurance policy. Think very carefully before giving up guaranteed, usually inflation-linked income.
- One-and-done planning. Retirement is a 25 to 35 year project. Review the plan and the portfolio at least annually.
A simple worked example
Imagine you plan to retire at 65, spend primarily in euros, and want to maintain a lifestyle equal to £70,000 a year in today’s prices.
- You expect £12,000 from secure, inflation-linked sources.
- Your gap is £58,000 in today’s money.
- In go-go years you plan £10,000 of additional travel, easing to £5,000 in slow-go, then £0 in no-go, while allowing for higher healthcare later.
- You set portfolio assumptions after fees that are conservative and run a base case, then stress scenarios with early market weakness and a weaker sterling.
In a typical model, your required pot may sit in the low to mid seven figures, but the precise answer depends on the inflation you assume for each stage, your currency stance, your fee level, and how strictly you will follow guardrails. The most valuable output is not the headline number, but the confidence that you can adapt without derailing the plan.
Your action list
- Write three stage budgets in today’s prices.
- List secure income and check your State Pension forecast and NI record via the Future Pension Centre.
- Build a diversified, currency-aware portfolio and document a rebalancing policy.
- Control fees and consider consolidation where it simplifies life.
- Model inflation and sequence risk, establish guardrails, and revisit annually.
- Use wrappers selectively if they improve the after-tax outcome during expatriation.
FAQs
How long do the go-go, slow-go and no-go phases typically last? There is no rule, but many retirees see 10 to 15 years of go-go activity, 10 to 12 years of slow-go, and a later stage focused on essentials and care. The split matters less than writing realistic budgets in today’s money and then indexing them in the model.
Should I base the plan on a single inflation rate? You can, but many expats prefer to model general spending at one rate and healthcare at a higher rate. Either way, index the plan and review regularly. The discipline matters more than the exact decimals.
What does “diversified” actually mean in practice? A spread of global equities, high-quality bonds and cash at a minimum, with limits on any one sector or region. Combine this with a rebalancing policy so your risk does not drift after market moves.
Where to go next
- Book a retirement cash-flow session. We will translate your stage budgets into a personalised number and set portfolio guardrails.
- Related guides for deeper reading:
What now?
Email me two things: your desired retirement age and a first-draft go-go budget in today’s money. I will convert that into an initial retirement number, show you the impact of inflation and fees, and outline a diversified, currency-aware portfolio to support it. If you prefer, book a discovery call and we will build it together.
