Households need more than £740,000 for 25 years of financial independence

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The average UK household would need savings of £743,338 to achieve 25 years of financial independence in retirement, according to new research from mutual insurer Shepherds Friendly.

The study analysed household spending, debt levels and emergency savings requirements, applying assumptions of 2.88% annual inflation and a 5% return on investments to calculate the sums required.

It found that with average annual expenditure of £31,653, rising with inflation, a household would need £1.17 million over 25 years.

Once adjusted for debt and savings growth, the figure comes down to £743,338.

SHARP RISE

The lowest-earning 10% of households would require around £381,000, while those in the top 10% of earners would need more than £1.32 million.

The figures rise sharply for those seeking financial independence for life. Younger adults aged 18–30 would need £1.18 million to fund living costs until age 90, compared with just under £1 million for those in their 50s or early 60s, and about £500,000 for people in their late 60s to early 70s.

Derence Lee, chief finance officer at Shepherds Friendly
Derence Lee, Shepherds Friendly

Derence Lee, chief finance officer at Shepherds Friendly, said: “A common and effective strategy for becoming debt free is to focus on paying off high-interest debts first, as these cost you more over time.”

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