3/11/2013 6:45 PM ET|
Retirement expectations vs. reality
Researchers check in with current workers and retirees to see where their ideas about retirement differ -- and the contrast is often stark.
Current workers who are planning for retirement often envision their golden years as something very different from what current retirees are actually experiencing. A recent BlackRock and Boston Research Group poll of 1,002 workers with retirement accounts at work and 1,035 retirees who previously participated in a 401k or similar type of retirement plan found that workers are expecting to pay for and experience retirement in a way that contrasts with the lifestyle of current retirees.
Here's a look at how current workers are planning to remake retirement:
Aiming for a later retirement age
Many current workers plan to stay on the job until their mid- or late 60s. Some 48% of workers estimated that they will retire at age 64 or later. An additional 17% of workers surveyed think they will never retire because of their finances or personal preferences.
"They are much less confident of their ability to actually amass the dollars they need to retire," says Warren Cormier, the president of Boston Research Group. "I don't know if it's pessimism or realism. They are not as far along in the path toward retirement as they had hoped."
Only 19% of current retirees were able and willing to work until age 64 or later. Job losses, health problems or family circumstances often push people into retirement ahead of schedule. While only 11% of current workers plan to retire before age 60, 42% of current retirees left their jobs before reaching their 60s.
Planning on working in retirement
Only 15% of current workers envision a retirement that involves not working at all. Most workers would like their retirement to include volunteer work (36%), paid employment even though they won't need the money (34%) or working out of necessity (15%).
"Working a few more years really lessens the amount you will need in retirement," says Chip Castille, the head of BlackRock's U.S. and Canada Defined Contribution Group. "As we move into a retirement system that relies more on defined-contribution than defined-benefit plans, people are realizing they may need to work a little bit longer."
Most of the retirees surveyed (86%) don't have employment that provides them an income. And planning to work in retirement doesn't mean you will be able to find a job or will still want to work or be able to work in your late 60s.
Depending on a 401k to fund retirement
Almost half of workers (48%) expect their 401k or 403b plan to be their largest source of monthly income in retirement. Most workers (75%) expect to begin drawing down their 401k at age 65 or later. But only 15% of retirees get 25% or more of their retirement income from their 401k and similar types of savings and investment accounts, even though all the retirees in the survey participated in a retirement account while they were working.
"The current retirees take a vast portion of their income from secure income sources such as Social Security and legacy defined-benefit plans, and they are secure in their concept of receiving Social Security," says Cormier. "People who are actively working today don't have a defined-benefit plan available to them. The only thing they have left to expect is a defined-contribution plan. It's a completely different mix of what is available to them to pay expenses in retirement."
The more retirement income sources you have, the better protected you will be if something goes wrong with any one of them.
Saving for a shorter period of retirement
Most workers (61%) think their savings or investments will need to last for 20 and 29 years. Only a quarter of employees surveyed think their retirement savings and investments will need to last for 30 or more years.
But what if you end up living until 100? Most retirees (52%) think their savings need to last for 30 or more years after retirement.
"Current workers tend to underestimate how long they are going to live, and retirees have a better idea," says Castille. "Retirees have actually gone through the exercise of creating a budget."
More from U.S. News & World Report:
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I've been working since I was 12; saving since I was 18 and I have amassed nearly $2M in savings and investments.
I don't own (and never have) any boats, jet skis, summer homes, snow mobiles or luxury cars.
I drive a 12 year old pickup that is paid for and have no debt but what remains of my mortgage.
I'm 66 and still working only because I'm still having fun at what I do and because I believe it is important work.
The interest-dividends from my savings and investments, coupled with my Social Security will easily match my current working income.
It's about choices. The life you live is about the choices you make.
My wife has followed a similar path.
Because of our choices, we can retire (or not) at any time we like, with the expectation that our lifestyle will not be affected.
It's really all about choices.
I recently retired at 58 years of age, which I had always wanted to do. I am fortunate to have an employers pension which will cover my living expenses, to include my mortgage. For a few years I will have to draw on my savings to pay insurances and real estate taxes but I hope to sell the house within 2-3 years. I will start drawing on social security at 62 years which will then be used to pay for taxes and insurance. My 401K will stay as is until maybe my 63rd birthday only because taxes keep going up and I want to draw down so not to pay a higher tax. I will draw down on it and just put it in a savings account. I still live as I did when working, the simple life. I do not believe in spending on things that are not necessary. My only debt is the house. My car is almost 13 years old and in very good condition. I had a long commute to work and was spending almost $150.00 a month on gas; now that I am retired I am spending maybe $10.00 a month. I am glad to have retired and will make the best of what I do have. I never depended on anyone, to include so called financial experts, to tell me what I needed for retirement. After all I am the only one who knows what I need and want out of retirement.
Ahoy' The national average for men is 68 years Hmmm ! Himself joined the US Navy at 16 years old and never looked back. Better to be lucky than smart. California housing market paid off very well and I retired at 55 to the RV life while
I was able to still get around and enjoy the weather for 6 years. Golf at the Dukes is where I call home in Arizona now as
I was lucky to have beaten the odds so far at 81 years. Do your thing while your able to be so lucky be alive. Happy trails.
It is nice to have succeeded in the world. Materialism is just what it
is. It's nice, but not an end all. I know many who have worked hard
planning and foreseeing a particular future for themselves, but to
unseen issues in the market place, such as job outsourcing, changed
there whole course of Life. Worldly success is nothing to brag about,
but to be thankful for. No one can say, tomorrow I will... Or in twenty
years ... Enjoy life today, praising God for his Grace and rejoice in
the love of Christ. Get out and enjoy His creation and if you have a
friend, thank God.
So my plan is to work and save my butt off (like I've always done) and let the chips fall where they land.
The one thing going for me is I'm not too picky about things. I don't need the latest and greatest things to be happy and as long as I'm happy in retirement that's all that really matters.
If there were no SS, pensions or retirement plans and people were taught to plan their life to the end then the world would be a better place. Personal responsibility would become the norm instead of an anomaly. Having others plan for you and take care of you is demeaning and the current state of our nation reflects the culture of entitlement.
Based on the most current estimates, Social Secutiry will run out of money the same year I plan to retire. So my retirement gift from the Democrats and Republicans will be a check that I can carry with me to the outhouse and use to wipe my butt. The check might even have some small printing at the bottom stating "This retirment check has no actual cash value".
Here's something that would be great if done by all large companies: In my case, my teachers pension does not include health insurance, so the teachers in my countywide system vote, each contract, to effectively take a hit in payroll in order to provide retirees who worked long years in the county with 75% subsidized, very good, low-copay, BCBS health insurance. The motivation to take the payroll hit, as it was when I was working, is that you know you're going to want the same deal when you retire. So my retirement health insurance, at super-large company rates, is guaranteed for life - though it may drop under 75% subsidized if health costs keep beating inflation.
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