Total lifetime earnings is another metric that it’s definitely worth measuring, not only will this be helpful when planning for your retirement, it’s interesting to see how your total expected income will compare to your expected future expenses.

To work out your total lifetime earnings, you need to plot out your expected income for each year between now and your planned retirement age and then add each year’s income together. The starting point should be your current annual income adjusted for a reasonable annual percentage increase each year.

So if you’re interested in working out your expected total lifetime earnings, seeing how this compares to the average in the UK and how this number will impact your retirement plans, please read on.

How to work out your total lifetime earnings

There are a number of ways to work out your total lifetime earnings and it’s worth saying from the outset that this number is a prediction and so can never be completely accurate.

For example, it would be unreasonable to factor in winning 20 million in the lottery at age 50 but it is of course possible that this could happen (even if it is very unlikely!).

The easiest way to predict your lifetime earnings is to follow the below steps:

  1. What is your current age? Example: 30 years old
  2. At what age do you plan to retire: Example: 65 years old
  3. What have been your total earnings to date? This should be easy to work out as you will have records of what you earnt. Example: £200,000 (£20,000 per year net salary * 10 years).
  4. What is your current salary? Example: £20,000 per year net salary after taxes.
  5. What is your expected increase each year to retirement? Example = assume it only increases with inflation, so 3% per year.
  6. Work out your expected future earnings from your current age to your expected retirement age*. Example: £1,209,241.61
  7. Add your earnings to date (£200,000) per step 3 to your expected future earnings to retirement (£1,209,241.61) per step 6. Example: £1,409,241.61.

*This stage is easiest by using a future value calculator such as this one with a number of periods as 35, an Interest rate of 3%, a periodic deposit of £20,000 and then selecting ‘end’.

There you have it, in this example, the total expected lifetime earnings are £1,409,241.61 which is a significant number, particularly given the person in this example is earning an unspectacular annual net salary of £20,000 adjusted for inflation.

Obviously, this method (and every method) has a few limitations. The biggest two issues are predicting your retirement age and guessing how your salary will change over time.

The retirement age is less of a problem as although it may be hard to get this exactly right, it’s easy to get this broadly right, i.e. most people retire between 60 and 70 years old.

The bigger issue is predicting how your salary will change over time. In the example above, we have just assumed the income will increase by inflation of 3% each year but this assumes the person doesn’t get promoted or have any big salary increases in their career.

To get around this issue, a better way may be to see what other people in similar industries earn at each level of experience and build an expectation on this.

If the above steps involve too much maths for you, try using an online calculator which uses the same variables as I’ve highlighted above.

lifetime earnings graphic

How much do people earn in a lifetime in the UK on average?

Total lifetime earnings, which is also known as “human capital” was £643,000 for men and £380,000 for women in 2018 per this source.

This may sound low in comparison to our fictitious example above but in that example, we had 45 years of work and assumed inflation of 3% per year which may not sound high in comparison to today’s levels but is much higher than throughout history.

Based on the above, men clearly have much larger total lifetime earnings than women. This is due to a number of factors including longer average careers, the impact of maternity leave or time off work to raise children and the career preferences of each sex.

Whilst the total ‘human capital’ is larger for men, interestingly, women’s lifetime earnings are growing at a faster rate than men’s due to the greater propensity of women in the employment pool which suggests if this trend continues the total lifetime earnings of men and women may be similar in the future.

To work out what your hourly rate is based on your annual salary, click on the following link to read my post on this topic: Hourly salary calculator UK: How to work it out and what it means

How to predict your future income

As mentioned above, the most difficult variable to predict is your future income. Clearly, there are numerous events that can occur that will have an effect on your future income such as promotions, time off work due to illness or personal circumstances, career changes to a higher or lower-paying role and so on.

There are a number of ways to predict your future income. The most simple is to simply assume your salary will increase with inflation. This is unlikely to be accurate and there is the small matter of guessing what inflation will be over the long term which is easier said than done.

Perhaps more accurate would be to map out a typical career route in your industry e.g. 5 years at this level, 5 years as a manager, 5 years as a director etc and predict the salary at each level. Once this is done, you can have a good estimate of what you will earn at each stage of your career and then add up each year to predict what your total future lifetime earnings will be.

How to predict your likely retirement age

The second variable to consider is your likely retirement age. The average age for retirement in the UK is around 65 years old which may be a useful starting point.

However, many people retire significantly younger than this, particularly if they have amassed a large nest egg during their working years. Based on this, if you are planning on retiring early, you would need to factor this into the lifetime earnings calculation.

Why calculating your lifetime earnings is useful for retirement planning

Working out lifetime earnings is useful for retirement planning as it’s the first step in predicting what money you will have left to sustain you throughout retirement.

Clearly, lifetime earnings consider the gross earnings you have amassed in your career and doesn’t consider tax or national insurance contributions which means your net salary received in the bank is much less than the gross salary as reported on your payslips.

For this reason, it’s much more useful to consider your net lifetime earnings (after paying taxes) than your gross lifetime earnings for the purpose of retirement planning.

For more on this subject, click on the following link to read another one of my posts: What is a comfortable retirement income in the UK?

Which professions have the highest and lowest expected lifetime earnings?

When considering which professions have the highest and lowest expected lifetime earnings, it’s not just the annual income that’s important, it’s also the longevity of the career.

For example, a boxing star may make a huge annual income during their peak but they are only likely to fight between the ages of 20 and 30 so have a short period where they are amassing these high incomes.

A businessman, on the other hand, may make less during these years but this profession can be done to age 65 and beyond, so has much greater longevity.

Despite this, sports, music and tv stars are likely to have the highest expected lifetime earnings due to the substantial money they can earn during their career. Even outside of their peak, these people earn significant money through royalties, punditry, book deals and other avenues.

In terms of ordinary careers, banking, investing and entrepreneurial routes tend to lead to the highest lifetime incomes.

The lowest expected lifetime earnings belong to those on low hourly rates who are unable to work long hours or who aren’t able to work for a long career.

The embedded image of a man on a chair with feet resting on a dollar sign represents lifetime earnings

What is the best calculator to use to work out expected lifetime earnings?

There are a number of good online calculators to work out your expected total lifetime earnings, each with slightly different variables and calculations behind them. Check out the following options:

  1. Option one
  2. Option two
  3. Option three

How do lifetime earnings in the UK compare with the rest of the world?

Lifetime earnings in the UK compare favourably with most of the rest of the world as you may expect given the UK is a developed, western country with relatively high incomes.

However, lifetime earnings appear to be slightly lower in the UK than in the US, however, this is likely skewed by the number of significant income earners in the United States in comparison to the UK.

As always, please remember I am an Accountant, not your Accountant. In this post (and all of my others) I share information and often give anecdotes about what has worked well for me. However, I do not know your financial situation and I do not offer individual financial advice. If you are unsure of a particular financial subject, please hire a qualified financial advisor to guide you.

This article has been written by Luke Girling, ACA – a qualified Accountant and personal finance enthusiast in the UK. Please visit my About page for more information. To verify my ACA credentials – please search for my name at the ICAEW member finder. Please comment below or contact me here to get in touch with questions or ideas for future posts.