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…You’ll End Up Where Everyone Else Is: Poverty in Retirement
Let’s not sugar coat it: 15.3 million people in the UK are heading towards poverty in retirement! That’s not just a stat—it’s a flashing red warning sign.
Despite saving more than ever, 39% of people still aren’t on track for even a minimum basic lifestyle in retirement.
Why? Because the cost of living is rising faster than your poorly invested pension pot can keep up.
Read on for a cool calculator to visualise your current net-worth split!
We all love stats at Rebel Finance School so here are some that might just scare some people into action. This might be the article that you need to share with your friends and family to get them to take action before it is too late!
- The average projected retirement income is £17.2k/year. This means that the average person getting to retirement will have only £1,356-£1,428 after tax a month to live on. Do you think you could live on that?
- The minimum lifestyle threshold is £14.8k/year — and that’s without housing costs. This is the amount that according to the Pensions and Lifetime Savings Association (PLSA) you need to just survive!
- Half of the UK population knows they aren’t saving enough. This one shocks me! Over 50% of us know we aren’t saving/investing enough and we are doing nothing about it!
- If you’re self-employed? 51% won’t even be able to cover basic needs in retirement. This is crazy. Self-Employed people come on, let’s help you get on top of your finances otherwise you won’t be able to turn on the heating in retirement!
If you’re following the traditional script — buy the biggest house you can afford, pay off the mortgage, hoard cash, and hope for the best — you’re headed towards some uncomfortable financial problems in retirement.
What Counts (and What Doesn’t)
Let’s talk about your net-worth. Later in life you might think you’re doing well because:
- You’ve got a house worth £600k.
- You’ve got a nice car.
- You’ve paid off your mortgage.
- You’ve got £50k in cash.
This is the position that lots of people end up in, but your house doesn’t pay your bills in retirement. You can’t eat bricks. And your car? It’s a depreciating liability with leather seats.
What actually counts is your Freedom Fund — the money that works for you when you stop working. That’s your pensions, investments, and income-generating assets.
This is not what people focus on!
The Net Worth Illusion
Most people’s net worth is a mirage. It looks impressive on paper, but it’s locked up in stuff that doesn’t generate income, and definitely won’t look after them in retirement.
Let’s say your net-worth is £800k. This might seem a long way off for a lot of you, but if you buy a house and focus on paying off the mortgage over 30+ years this is where a lot of people end up!
- £600k is your house
- £30k is your car
- £100k is cash
- £50k is in pensions/investments
That means only 6.41% of your net worth is actually working for your future. The rest? It’s just sitting there, looking pretty and doing nothing.
But that is what society tells us success is: a big house, a nice car, a good job, paying off the mortgage and some cash savings. If you have done this then you are a success in society’s eyes.
But where does that leave you in retirement?
Freedom Fund 101
Your Freedom Fund is the part of your net-worth that buys you time, choice, and peace of mind. It’s what lets you say “no” to work you don’t want and “yes” to the life you do.
This is the bit that Katie and I spent years building. We ignored paying down the mortgage, we ignored buying a bigger house and a bigger car and we put every spare penny we had in freedom.
The Freedom Fund includes:
- Pensions – Employer pensions, SIPPS, 401Ks, Kiwi Savers and more, invested in index funds
- Other investments – Index funds invested in ISAs, Roth IRAs, General accounts or however you hold them
- Rental income – from investment properties you own
- Dividends – from the stocks and shares you own
Anything that works whilst you are sleeping.
Our relentless focus on growing our freedom fund enabled us to retire at 35 and 40 years old. If you want different results, do something different to the average person.
You might be older than 40 already but that doesn’t mean you can’t take action and improve your financial situation. It is never too late to improve your finances.
Want to know how much of your net worth is actually freedom-focussed? Use our calculator 👇
The Visual Breakdown
This tool shows you exactly how your net worth is split. Is most of it tied up in your house and car? Or are you building a Freedom Fund that will carry you through retirement?
Try it. You might be surprised. Put your figures in below and it will give you a treemap visualisation of where you are now:
Rebel Reflection
If you do what everyone else does — buy the house, get the car, pay off the mortgage — you’ll end up where everyone else is: broke, stressed, and working longer than you want to.
But if you do something different — build your Freedom Fund, invest intentionally, and focus on income-generating assets — you can rewrite your future.
So here’s your challenge:
- Run your numbers.
- Look at your treemap.
- Ask yourself: Is this building freedom or just looking good?
Next Steps
✅ Use the calculator.
✅ Share this post with a friend / family member who needs a wake-up call and help changing direction. It is never too late to improve your finances.
✅ Start shifting your focus from “stuff” to “freedom”.
Rebel Finance School
Katie and I bought our freedom back so we could have fun, travel the world and help other people get on top of their finances.
Every year we run Rebel Finance School, a free 10 week course that gives you everything you need to change your financial future!
The course is running right now. You can sign up here and join in. Join over 40,000 people from 47 countries that are working to improve their finances and set themselves up for a bright future.
Having filled out the net-worth split calculator what did you learn? What were your insights? We would LOVE to know. Please write us a comment and tell us what you noticed from this exercise!
Peace ✌️and Pineapples 🍍
Alan and Katie
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I was pleasantly surprised, after entering my details. I cannot wait to start investing in my retirement fund to give us more freedom in our retirement.
At 63 years old I thought I had missed the opportunity to increase our fund, but after being on the course for two weeks and all the comments on the Facebook page I now realise this is not the case.
Thank you for doing what you are doing, It’s beyond words.
Andrew this comment made my day! YAY. Thank you so much. I am so excited for you to get going and see how this works. You are going to love the rest of the course. Thank you for commenting. This made my day! Alan and Katie!
I retorpestively watched RFS 2024 at the start of this year, that was eye opening. I started investing in Feb (I’m not panicking, I’m riding out the stock market waves and continuing to buy each month in a SIPP). I want to retire in 12 years time well before state pension. I have a car debt (finance runs out in 6 months) and a mortgage. The car debt will get paid off. What I struggle with is I have been overpaying on my mortgage for years to get this debt down. Should I be leaving that alone and investing instead? If I had a windfall should you pay off the mortgage (if it’s your only next left) or put it direct into investment?
Hey Erin, that makes complete sense and that is exactly what we did for a long time as we didn’t understand investing. When we did we set the mortgage to minimum, our interest rate was only 4% at the time and invested instead which made so much better progress. We did an article about this which might help: https://rebeldonegans.com/finance/take-control/should-i-pay-off-my-mortgage-or-invest/
The simple thing is that you will probably get better returns from an index fund than you will from the saving you make paying down your mortgage. And remember it is not binary, you could slow down the mortgage overpayments and then invest alongside on the journey. All the while having an eventual plan to get rid of the mortgage! Let us know what you think… Alan
Yes I see the light!
I have tons to do to sort this but am excited and seem to be successfully talking to my family on the discoveries so far after just two week classes. Thank you so much . I am so very grateful.
Caroline that is awesome. I love that. So excited to hear how your journey progresses!
Hello, you have answered one missing link about Net Worth as to how do pensions, rents, etc fit in…really appreciate that; however, I would not label equity in property as a liability, and ignoring it’s potential to cover long term care and legacy (two items the FI community tends to like to ignore) is a shortcoming. Treat it like an emergency fund, not a liability for cash flow. Thanks!
Hey David, We are calling it a valuable liability. We recognise it has value and can be sold and it costs you money every single month. What do you mean by legacy? things to leave to the kids? Not everyone has kids and we are all in different situations and if this is the bit you mean then index funds and other investments equally cover legacy. Interesting point about treating the property as an emergency fund, do you mean you can take out equity when you need it with different financial tools? Thanks for commenting as it is great to have different perspectives?
Legacy is wealth passed generationally, and while not everyone has kids or even wants to leave a legacy…some do…agree that personal finance is personal 👍
Hey David, then legacy would either sit under the freedom fund which you could pass to your kids or the home you live in (valuable liability) which you can also pass to your kids depending on inheritance tax levels in your country! Alan
If I’m mortgage free is this equity? I rent the house but make no profit. It covers bills . Also, I want to buy my dream house but would need a mortgage . I’m 43 , have an 2 year old and renting. My rent is peanuts as it’s military housing . I have 50k in an 122 cash ISA and teacher pension which I don’t understand . I did the course last year lessons 1,2,3 but didn’t finish it . I don’t understand A lot of it and feel scared if S&S ISA.
Jessica, On the rental property if you rent it out but make no profit at all then the property is speculation. We will be doing a lot on Rental properties in week 6 so I suggest watching that week and then working things out. In short if you have your money invested there and are making no return at all then it is a terrible investment and you would get a better return if you sold it and if you invested your money else where. Does that makes sense?
We can work through the fears and work on this. What specifically are you afraid of?
And just relax and go through the course and let’s work this all out together.
Alan
thanks for the article.
I’m 58 and only recently bought my first apartment, 175k NZD debt remaining.
my current goal is to pay it off ASAP (forecast 5 yr) to have that out of the way before retirement, before this I did invest.
wrong?
Limo depends on your interest rate. Sub 6% you are probably better off investing first and paying that slower over time. Read this one for a bit more detail: https://rebeldonegans.com/finance/take-control/should-i-pay-off-my-mortgage-or-invest/
Hi,
I’m currently struggling with using GIA accounts. I have maxed out my ISA and contribute to pension.
What do you do as far as tax / Capital gains in the GIA? I get that your answer might be you won’t have to worry about this for years but I like the ISA for anything I invest non pension as there is no tax or capital gains to think about. Do you move part of it at the beginning of each tax year? I currently have some money in premium bonds and high interest saving, will put maximum into ISA next year but as yet have not put anything into GIA for reasons above.
Hey John love your question. We ended up in this situation after maxing out allowances after a property sale and have money in a GIA account. Every year you have to pay dividend tax on the dividends you get in your GIA (better to get income units so you can see this) and then we sell off a portion to fill our SIPP and ISA accounts up again each tax year which is called Bed and ISA. Is that what you were asking?