That’s according to a new research report from Standard Life Aberdeen, which surveyed those looking to retire this year to discover how prepared they are, and how recent events have affected their retirement plans.

It found that the average 2021 retiree is planning to spend around £21,000 a year in retirement. However Standard Life argued that looking at their pension pots and the size of the state pension, around two in three face running out of money during their retirement if they spend at that level.

The research found that the average value of the pension pots saved by this group of soon-to-be retirees is £366,000, yet a third have saved less than £100,000.

Taking a long-term approach

John Tait, retirement advice specialist at Standard Life, said that retirement is a marathon, not a sprint, and many older people are going into retirement without sufficient planning or preparation.

He continued: “Pension pots are without a doubt the most popular option for funding retirement, but it’s so important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.”

Somewhat encouragingly, a substantial number of those planning to retire this year are at least aware of the risk of running out of cash. More than a third said they were concerned about not having enough money to last through retirement, while fewer than two in five (39%)said they felt very confident that they were financially ready to retire this year.

Around half of those surveyed said they were planning to reduce their usual spending in order to support themselves in retirement, while one in four plan to work part-time. Around a fifth (21%) are planning to sell their home or downsize in order to help fund their later life.

The report also included interviews with those who retired last year. Around seven in 10 said they were happy with the decision, despite the difficulties of Covid-19 restricting what they can do.

This is despite recent research which found that as many as one in five are delaying their retirement specifically because of Covid.

How much do I need to retire?

The study follows previous research from Standard Life which found that those nearing retirement aren’t altering their spending in order to prepare for retirement.

There are various factors that are denting our pension preparations. For example, while many of us over-estimate how generous the state pension is, we also underestimate how long we are likely to live once we give up work. 

There is also the danger of losing track of the pensions we do have, until the pension dashboard goes live.  

However, there are simple steps you can follow to give yourself the best chance of building a pension that will last you through retirement.