The formula
How to calculate retirement savings needed
Retirement planning starts with an income target rather than a pot. Once you know the income you want and the part already guaranteed, the savings requirement is whatever fills the difference.
The replacement ratio is below 100% for good reasons: pension contributions stop, commuting stops, the mortgage is often repaid and tax is usually lower. Somewhere between 60% and 80% is the conventional range.
What to enter:
- Current annual income
- Income to replace (%) — most households need 60–80% of pre-retirement income
- Guaranteed pension income — state pension plus any defined benefit scheme
- Withdrawal rate (%)
Everything recalculates as you type, and the numbers in the address bar update with it, so a link to this page carries your figures with it.
Worked example
Work through the defaults on this page:
- Current annual income: 55,000
- Income to replace: 70 %
- Guaranteed pension income: 11,500
- Withdrawal rate: 4 %
That gives:
- Savings needed: 675,000
- Annual income the portfolio must provide: 27,000
- Total retirement income targeted: 38,500
Reading the result
The state pension does more heavy lifting than people expect. At around £11,500 a year it is equivalent to nearly £290,000 of portfolio at a 4% withdrawal rate — subtracting it first often shrinks the target substantially.
Where this goes wrong. Counting the full state pension without checking your National Insurance record. The full new state pension requires 35 qualifying years, and career breaks or contracted-out periods commonly leave people short.
Around 70% is the usual planning figure. Use more if you plan to travel heavily or still have a mortgage; less if the house is paid off and your current income includes large pension contributions you will stop making.
Yes — subtract what you already hold from the savings needed figure to get what is still to accumulate. This calculator gives the total requirement, not the remaining gap.
The answer it gives you is savings needed. With 55,000 current annual income, 70 % income to replace and 11,500 guaranteed pension income, that comes to 675,000. Change any field and the figure moves with it.