The Cost of Retirement report, written by the Centre for Economics and Business Research, calculates a person who lives to 100 could need £708,500, based on a long-term inflation rate of 2.3 per cent. But it says if inflation stays where it is now the cost rises to £1 million.
If inflation rises to 4.6 per cent, the average person living to 100 would need £1.3 million for retirement.
Life Trust CEO Andy Briscoe said: “People are living longer, healthier lives. This is great news but only if people have the finances in place to really enjoy their post-career years.
“The combination of rising life expectancy and the impact of inflation over time can have huge financial implications, and this report allows us, for the first time, to see the scale of these trends.”
The report also shows that early retirement costs an additional £373,000 – or £25,000 per year – for those retiring at 50. Early retirees tend to spend an average of £5,000 each year on recreational activities at age 60, says the report.
A retiree’s expenses peak at 92, when the average spending is 50 per cent higher than at 65.
Briscoe explained: “With more and more people reaching 90 and beyond, and with 90 becoming the new 70 in terms of healthy ageing, it has never been more necessary for the industry and individuals to understand the true cost of modern retirement.”