How much do you actually need to retire in the North East?

Ask ten people what they need to retire on and you'll get ten numbers, most of them plucked from a headline. "You need a million." "Two-thirds of your salary." "Half a million and you're laughing."

None of them are wrong, exactly. They're just not about you. The honest answer is that the number depends on what you spend, where you live, and what you want your retirement to look like — and two of those three are things you can work out on the back of an envelope tonight.

Here's how to build your own figure rather than borrowing someone else's.

Start with what you spend, not what you earn

The "two-thirds of your salary" rule of thumb is popular because it's easy. It's also a poor fit for most people, because your salary includes a load of things that stop when you retire.

By the time you finish work you may no longer be paying:

• pension contributions (often 5–8% of pay, sometimes far more)
• National Insurance (you stop paying it once you reach State Pension age)
• commuting costs
• a mortgage, if you've cleared it
• anything you were spending on children who have since left home

So start from the other end. Take three months of bank and card statements and total up what actually leaves your account. Split it into two columns:

Essentials — housing, council tax, energy, water, food, insurance, phone and broadband, transport, and any debt repayments that will still exist.

The good stuff — holidays, eating out, hobbies, presents, running a second car, the season ticket.

Add them up, multiply by four, and you have a rough annual figure. That, adjusted for the changes above, is much closer to your retirement number than any percentage of your salary.

Why the North East changes the maths

National retirement income figures are heavily weighted by the South East, and housing is the reason. A retired couple in the North East who own their home outright are, in cash terms, in a materially different position to the same couple in Surrey — the same lifestyle simply costs less to run here.

That cuts both ways, though, and it's worth being clear-eyed about it:

• Housing costs tend to be lower. Lower purchase prices mean mortgages are more often cleared before retirement, and rents are lower for those who don't own.
• Council tax is not automatically lower. Bills are set locally, and lower property values put homes in lower bands, but the rate per band varies. Check your own bill rather than assuming.
• Energy is not cheaper, and can be dearer. Older housing stock, colder winters and a longer heating season all push bills up. If your home is poorly insulated, that's a retirement expense, not just an annoyance.
• Rural transport costs more. If you're outside the Tyne and Wear Metro area, or in Northumberland or County Durham, running a car isn't optional. Budget for it — including replacing it once or twice over a thirty-year retirement.

The upshot: the ceiling on a comfortable retirement is usually lower here than the national headlines suggest, but the floor is not as low as you might hope, because heating and getting about are unavoidable.

Three tiers to sanity-check yourself against

Rather than one target, it helps to think in tiers. The industry uses a version of this, and the logic holds wherever you live.

Getting by. Everything essential is covered. You keep the house warm, eat well, and can replace a washing machine without borrowing. No car, or an old one used sparingly. A holiday in the UK.

Comfortable. Essentials covered, plus a car you trust, a fortnight abroad, meals out, hobbies, and enough slack to help the family occasionally.

No compromises. All of the above, plus a bigger travel budget, a newer car, and the freedom to spend on the things you've been putting off.

Write down what each of those looks like for you, in pounds. Most people find the gap between "getting by" and "comfortable" is smaller than they feared, and the gap between "comfortable" and "no compromises" is larger.

Now count what's already coming

Your target is only half the sum. The other half is the income you've already built.

State Pension. The full new State Pension is the backbone of most retirements, and it's inflation-linked, paid for life, and needs no management. But you only get the full amount with enough qualifying National Insurance years — get a State Pension forecast from GOV.UK, because gaps are common, particularly for anyone who took time out to raise children or was self-employed. It's also worth checking the age you'll receive it, which has moved more than once.

Defined benefit (final salary) pensions. If you've worked in the NHS, local government, teaching, the civil service or one of the region's older employers, you may have one. These pay a guaranteed income and are enormously valuable. Dig out the statement.

Defined contribution pots. Your workplace pension and any old ones from previous jobs. These are savings pots, not incomes — turning a pot into an income is a separate decision with real consequences.

ISAs, savings and anything else. Cash, stocks and shares ISAs, rental income, an inheritance you're fairly sure of.

Add the guaranteed incomes together, and you'll see how much of your target is already covered. Whatever's left is the gap your pots and savings need to fill.

Turning a pot into an income

This is where people get stuck, and where the rules of thumb do the most damage.

A pot is not an income. To convert one into the other you either buy an annuity — a guaranteed income for life, whose price moves with interest rates and your health — or you draw from the pot and leave the rest invested, which gives you flexibility and hands you the risk of running out.

The old shorthand was to divide the pot by 25 for a sustainable annual income, i.e. drawing 4% a year. It's a starting point, no more. The right figure depends on your age, your health, how much of your income is already guaranteed, how you're invested, and how much you'd tolerate cutting back in a bad year.

A worked example, purely to show the shape of it: a target of £28,000 a year, with a full State Pension of around £12,500 and a final salary pension of £6,000, leaves roughly £9,500 a year to find. At a 4% withdrawal rate that implies a pot of about £237,000. Change any of those inputs and the answer moves substantially — which is exactly why the generic headline numbers are so unhelpful.

Don't forget the tax

Pension income is taxable income. The State Pension counts towards your Personal Allowance even though tax isn't deducted from it, so it's usually the rest of your income that gets taxed to compensate.

Three things worth knowing:

• 25% of a defined contribution pension can normally be taken tax-free, subject to an overall limit; the remaining 75% is taxed as income.
• ISA withdrawals are tax-free and don't count as income, which makes them useful for managing your tax position year to year.
• Taking a large lump sum in a single tax year can push you into a higher band. Spreading it across two tax years sometimes costs nothing to do and saves a meaningful amount.

What to do this week

1. Get a State Pension forecast from GOV.UK.
2. Total three months of spending and split it into essentials and the good stuff.
3. Find every pension statement you can, including old jobs. Use the government's Pension Tracing Service for the ones you've lost.
4. Write down your "comfortable" number.
5. Put the whole lot through our Retirement Readiness calculator to see where you stand — and how much a small increase in contributions would change it.

The point isn't to arrive at a perfect figure. It's to replace a vague worry with a number you can actually do something about.

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This article is general financial education, not personal financial advice. Tax and pension rules depend on your circumstances and can change. Consider seeking regulated financial advice before acting.