How Retirement Expectations Differ From Reality

Workers are envisioning a retirement that contrasts sharply with the experience of current retirees.

An older worker on the phone
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Current workers who are planning for retirement often envision retirement 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 401(k) 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 percent of workers think they will retire at age 64 or later. Another 17 percent of workers surveyed think they will never retire due to 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, president of Boston Research Group. "I don't know if its pessimism or realism. They are not as far along in the path toward retirement as they had hoped." Only 19 percent of current retirees were able and willing to work until age 64 or later. Job loss, health problems, or family circumstances often push people into retirement ahead of schedule. While only 11 percent of current workers plan to retire before age 60, 42 percent of current retirees left their jobs before reaching their 60s.

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Planning on working in retirement. Only 15 percent of current workers envision a retirement that involves not working at all. Most workers would like their retirement to include volunteer work (36 percent), paid employment even though they won't need the money (34 percent), or working out of necessity (15 percent). "Working a few more years really lessens the amount you will need in retirement," says Chip Castille, 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 percent) don't receive any income from employment. 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.

[Read: New Retirees: Avoid These Mistakes.]

Depending on a 401(k) to fund retirement. Almost half of workers (48 percent) expect their 401(k) or 403(b) plan to be their largest source of monthly income in retirement. Most workers (75 percent) expect to begin drawing down their 401(k) at age 65 or later. But only 15 percent of retirees get 25 percent or more of their retirement income from their 401(k) 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.

[Read: 10 Things You Should Know About Your 401(k) Plan.]

Saving for a shorter period of retirement. Most workers (61 percent) think their savings or investments will need to last for between 20 and 29 years. Only a quarter of the 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 percent) think their savings needs 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."