What would a 12-month income shock really cost you?
A free UK calculator showing the full lifetime cost of unemployment, illness, redundancy, sabbatical or career break. Most people only count the income lost during the shock — but that money would otherwise have stayed invested and grown, and over decades the opportunity cost can be several times the income lost. See your number in seconds.
Your figures
Income & expenses
£
£
Shock severity
Income lost (% of your usual income)
% lost
Shock duration
12 months
1mo6mo12mo24mo36mo
Years until retirement
30 years
5152540
Long-term real growth rate
Direct cost
—
Net savings shortfall during the shock
Opportunity cost
—
Growth foregone over your remaining years
Lifetime cost
—
Direct + opportunity cost at retirement age
Net worth projection · baseline vs scenario
Baseline (no shock)With income shock
Information only, not financial or insurance advice. Figures are projections based on the inputs you provide and a constant growth assumption. Real outcomes vary. For decisions that matter, talk to a regulated financial adviser.
See this against YOUR finances
Income Shock is free in WealthR's Scenarios tab, running against your own take-home pay, spending, net worth and projected FIRE date — so the cost shows up as a change to your own plan, not a worked example. Pro saves scenarios by name and compares them side by side.
The lifetime cost is built from two transparent components:
1. Direct cost (take-home pay lost during the shock)
directCost = takeHome × lossPct/100 × months/12
With spending unchanged, your wealth falls by the whole of the pay you did not receive: either savings cover the bills, or the saving you would have done stops, or both. If you would cut spending during the shock, the real hit is smaller by whatever you cut.
2. Opportunity cost (compounding lost over remaining years)
Money lost during the shock can't compound for the years between then and your retirement. £6,000 lost, over 30 years at 5%, is about £19,000 of growth that never happens — more than three times the money itself.
3. Lifetime cost
lifetimeCost = directCost + opportunityCost
The full cost the income shock will have produced by the time you reach your assumed retirement age. The chart above shows the gap between baseline and shock-scenario net worth, year by year.
What's excluded from the maths
Universal Credit or other benefits (set the loss percentage to reflect your net post-benefit income), income protection payouts (similarly, set the loss percentage to reflect the residual after IP pays out), redundancy payments (subtract these from the direct cost yourself if applicable), and career-progression damage (lost promotion timing, pension contribution gaps) — these are all real but harder to standardise into a calculator. The figure shown is a clean lower-bound estimate of the savings impact.
Why opportunity cost is the big one
Most income-shock conversations stop at the direct cost — "I lost £18,000 of net pay during my 12-month redundancy". That number is real, but it's not the full bill.
The full bill includes the wealth that money would have grown into if your savings rate hadn't been disrupted. Some realistic UK examples:
£35k take-home, 100% loss for 12 months, 30 years to retirement, 5% growth. Direct cost: £35,000. Opportunity cost: ~£116,300. Lifetime cost: ~£151,300. About four times the direct figure.
£60k take-home, 50% loss for 6 months, 25 years to retirement, 5% growth. Direct cost: £15,000. Opportunity cost: ~£35,800. Lifetime cost: ~£50,800. About three and a half times the direct figure.
£45k take-home, 100% loss for 12 months, 5 years to retirement, 5% growth. Direct cost: £45,000. Opportunity cost: ~£12,400. Lifetime cost: ~£57,400. Only about 30% larger than the direct figure — there's barely any time left to compound.
Two patterns fall out of this. First, the same shock is mathematically much more expensive earlier in your career than later — time horizon is the multiplier. Second, the direct cost is set by the pay lost, not by how much you were saving — so a household that saves little is hit just as hard, and has less of a buffer to absorb it.
Common questions
Income shock is any period of reduced income — job loss, illness, career break, parental leave, redundancy. The full cost is much larger than the income lost during the shock because the money lost during those months would otherwise have stayed invested and grown until retirement. With 30 years to go at a 5% real return, a 12-month shock costs about four times the income lost once that growth is counted.
ONS labour market data shows the median UK unemployment spell sits around 3-6 months but the right-tail is long — around 1 in 4 unemployed people in the UK remain unemployed for over 12 months. Health-driven income shocks tend to be longer. Most personal finance commentators recommend planning a buffer for 6-12 months of essential expenses minimum, with longer for those in volatile industries or single-earner households.
The shock severity slider lets you set the percentage of income lost — so if you expect to receive UC or other benefits during the shock period, set the loss to the net reduction in your total monthly income rather than 100%. UC is income-based and asset-tested above £16,000 of savings, so households with significant savings often don't qualify regardless of unemployment status. This is general information, not benefits advice.
Opportunity cost is the growth your money would have produced if it had been invested rather than spent absorbing the shock. £6,000 used up during a shock would, if it had stayed invested at a 5% real return for 30 years, have grown to over £25,000 in today's money. The £19,000 of growth is the opportunity cost — wealth that never compounded because the money was spent. This is why income shocks early in your working life are mathematically more expensive than the same shock late in your career.
Standard UK personal finance guidance suggests 3-6 months of essential expenses for stable single-earners, 6-12 months for the self-employed, sole-earners or those in volatile industries, and 12-24 months for those approaching FIRE or retirement when re-employment is harder. The calculator can be run with shock duration set to match these scenarios to see how big a buffer is needed to cover the worst plausible case.
No — early shocks are mathematically more expensive. £6,000 lost at age 30, with 35 years to compound at 5%, would have grown to about £33,000 by 65. The same £6,000 lost at 60, with 5 years to go, would only have grown to about £7,700. Setting the years-to-retirement slider lower shows the smaller opportunity cost for shocks closer to retirement.
5% is a reasonable real (after-inflation) long-run UK equity assumption used in many UK financial planning contexts. 7% is closer to long-run nominal global equity returns. 3% is a conservative figure closer to a balanced portfolio with significant bonds. The chips let you compare quickly. The opportunity cost figure scales with this rate — using 7% shows roughly twice the opportunity cost of 5% over a 30-year horizon.
Yes, and arguably it matters more for self-employed people. Self-employed people get no Statutory Sick Pay and no statutory redundancy pay. Universal Credit normally assumes a self-employed claimant earns a minimum amount (the Minimum Income Floor), though a new business can have a 12-month start-up period without it. Typical guidance for the self-employed sits at the longer end (12 months or more of essential spending), which the duration slider can model.
Income protection insurance pays a percentage of your income (typically 50-65%) if you can't work due to illness or injury. Premiums vary by age, occupation and policy. Running the calculator with shock severity set to your post-IP residual percentage shows the financial gap insurance would need to fill. Whether a policy is worth its premium depends on your circumstances; an FCA-regulated adviser can give personal guidance. This calculator is information only.
Income Shock is free in WealthR's Scenarios tab. It runs against your own take-home pay, spending, net worth and retirement projection, so the cost shows up as a change to your own plan rather than a worked example. Saving scenarios by name and comparing them side by side is part of Pro.
No. This is an information tool for projecting typical income-shock costs. WealthR doesn't give financial, tax or insurance advice. For your specific situation talk to a regulated adviser.