What £5,000 more spending a year does
Everyone asks how big the pot needs to be. Almost nobody prices the other side of the equation. Here is what each £5,000 step in annual spending costs the same £600,000 portfolio.
The setup
A 60-year-old retires today with £600,000 invested and no further contributions. The State Pension of £11,500 begins at 67 and rises with inflation. The plan runs to 95. The only thing that changes between the four runs is the amount taken from the portfolio each year in today's money.
Assumptions used
- Age today / retiring at / plan to
- 60 / 60 / 95
- Starting portfolio
- £600,000
- Annual contributions until retirement
- £0
- Retirement spending from the portfolio
- £30,000 a year, today's money
- Guaranteed income
- £11,500 a year from age 67
- Expected return / inflation / volatility
- 6% / 2.5% / 13%
- Simulation
- 1,000 runs, returns drawn at random each year
- Spending is the gross amount withdrawn, before any income tax.
- Spending rises with inflation every year — no natural decline in later life is assumed.
Taxes, platform charges and changes in spending through retirement are not modelled. Figures are illustrations produced by the Retiris model, not predictions.
Results across 1,000 simulated markets
| Scenario | Runs that lasted | Median years funded | Typical shortfall age | Steady projection |
|---|---|---|---|---|
| £25,000 a year | 88% | 35 | 90 | £794,067 left at 95 |
| £30,000 a year | 68% | 35 | 87 | £446,590 left at 95 |
| £35,000 a year | 41% | 32 | 85 | £99,112 left at 95 |
| £40,000 a year | 26% | 24 | 81 | Runs out at 88 |
Middle of simulated outcomes, in today's money
What each step costs in capital
Success at £30,000 was about 68%. Raising spending to £35,000 dropped that to roughly 41% on the same pot. Getting back to something like the original odds required a pot of about £750,000–£800,000 — roughly £150,000–£200,000 of extra capital to fund £5,000 a year for life. That is around 30–40 times the extra spending, higher than the familiar 25x rule of thumb because this horizon is 35 years and returns here are volatile rather than smooth.
Fixed versus flexible spending
The runs above assume the higher spending is permanent and inflation-linked. Real retirements rarely look like that. Spending £5,000 more during the first ten active years and then reverting costs a fraction of the amount above, because the extra withdrawals stop long before the portfolio's most fragile years. If you want a bigger budget, buying it as a defined, time-limited phase is dramatically cheaper than buying it for life.
Practical steps
- Split your budget into essentials and discretionary spending, and only inflation-link the essentials.
- Price any lifestyle upgrade in capital terms — multiply the annual figure by 30 before deciding.
- Set a rule now for what you would cut after a 20% fall, and how quickly you would restore it.
- Re-run the model each year with your actual spending rather than your planned spending.
Model your own version
Try your own version
Everything else stays as set out in the assumptions above.
In this model, under these assumptions. Not advice, and not a forecast.
Frequently asked questions
How much difference does £5,000 a year of extra spending make?▾
In these runs it is the difference between an 88% success rate at £25,000, 68% at £30,000, 41% at £35,000 and 26% at £40,000. Each £5,000 step removes roughly 20 percentage points of certainty.
How much more capital would I need to fund £5,000 more spending?▾
Going from £30,000 to £35,000 of spending on a £600,000 pot dropped success from 68% to 41%. Restoring roughly the original odds needed about £750,000–£800,000 — in other words, around £150,000–£200,000 of extra capital for £5,000 a year of spending.
Is the 25x rule of thumb consistent with this?▾
Broadly, yes. 25 times £5,000 is £125,000, and this model asks for a bit more because the horizon is 35 years rather than 30 and returns are volatile rather than smooth. The rule of thumb is a floor, not a target.
Does the extra spending have to be permanent?▾
No, and that matters enormously. Spending £5,000 more for the first ten active years and then reverting is far cheaper than an inflation-linked £5,000 for life. Model the shape of your spending, not just its level.
What about tax?▾
Spending in the model is the gross amount withdrawn. If your extra £5,000 comes from a taxable pension withdrawal, the real cost to the portfolio is higher than £5,000.
What is the cheapest way to afford more spending?▾
Usually a later start, a partial year or two of work, or making the extra spending flexible rather than fixed. All three are cheaper than finding another £200,000 of capital.
Sources
Modelled figures on this page were produced with the Retiris retirement model, described in full on how the model works. They are illustrations of hypothetical scenarios, not research findings about real households.
Retiris tools
Retiris publishes educational planning tools and analysis. Nothing on this page is personalised financial advice, and modelled scenarios are illustrations rather than predictions. See our editorial methodology and disclaimer.