Today’s young Britons would need to save more than £1 million to retire comfortably without depending on wages, new research suggests.
Due to the rising cost of living, coupled with longer life expectancies, 18- to 30-year-olds need £1,183,363 to stay financially independent until age 90 after retirement, according to a new study.
The analysis was conducted by investment and insurance company Shepherds Friendly, using average UK household spending rates, common debt, and a recommended six-month emergency fund.
The investigation also factored in 25 years of rising costs at 2.88 per cent annual inflation and a 5 per cent annual return on savings or investments, to reveal exactly how much would be needed today to enjoy 25 years of financial freedom in retirement.
Max Jarrold, chief growth officer at Shepherds Friendly, said: “Young people today are facing the toughest journey to financial independence of any generation. Our research shows that the target for 25 years of financial independence in retirement now stands at more than £740,000, a number that hits younger adults hardest because they must prepare for far more years of expenses in a highly volatile economic climate, grappling with rising living costs, longer life expectancy, and the compounding effect of inflation.
“Someone in their 20s may need to fund over 60 years of living costs, while the figure falls for older age groups simply because there are fewer years to cover. For people in their 30s and 40s, costs jump again because this is often the most expensive stage of life, with mortgages, childcare and everyday spending at their highest, but with less time for savings to grow.
“This combination of higher outgoings and shorter saving windows makes financial freedom especially challenging, and with young people having to do more with less, careful planning has never been more important.”
Individuals in their 50s and early 60s may need just under £1 million, while those aged 65 to 74 require around £500,000. For people over 74, the amount drops further to approximately £180,000.
The average UK household would need to save £743,338 to enjoy 25 years of financial independence. This is based on an average annual expenditure of £31,653, amounting to £1,168,765 over 25 years with inflation, plus typical household debt of £121,525 and a six-month emergency fund.
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For the lowest-earning 10 per cent of UK households, annual spending averages £15,551, with debts of £83,597. Adjusted for inflation, they would require around £381,107 to sustain 25 years of financial independence.
The struggle to enjoy retirement is escalated by the state pension age increasing from 66 to 67 next year, meaning millions of workers will have to wait longer for retirement.
