Could You Survive On £5,000 A Year?

The earlier you start planning for retirement the more time you've got to formulate a game plan.

I was castigating yet another old friend over dinner last night about why she and her husband should be thinking about how to finance their retirement now rather than waiting until the time came to retire.

With little in the way of a pension or savings, the only vague plan they've got is to sell their mortgage-free home and downsize but for the moment they're concentrating on paying their son's public school fees.

Admittedly, the proceeds from the sale of their home should provide them with well over the 'required' £1 million a colleague wrote about earlier this week but she agreed it would be a wrench to leave their home and move somewhere smaller when they stopped work.

When I pointed out that they could convert 'those stables' and 'that part of the house' to get three lots of rental income she started looking thoughtful.

More to the point, she agreed that, at 51, it was probably better sooner rather than later to put some serious thought into how they would finance their retirement.

They'll be hitting 60 by the time their son graduates from university and if they leave it till then to consider their options, it doesn't exactly give them much time to sort out a plan of action.

As it happens, my friends are clearly in a fortunate position. The Prudential has been monitoring pensioner income through its Retirement Index and the latest research shows that although the average income is just over £13,000 a year, there are as many as 1.4 million pensioners who are struggling to get by on less than £5,000 a year.After council tax, water and electricity bills, this leaves less than £60 a week to live on.

Considering retirement now lasts roughly 25 years for the average person, who wants to spend what's nearly a third of their life struggling by on less than a tenner a day?

Even the average pensioner income of £13,200 doesn't seem enough to provide for a comfortable retirement, which is why I always bang on about the importance of planning as early as possible for retirement. Even at the dinner table!