Where did retirement at 65 come from?

Senior_Citizen's_Valentine_Day_dance,_Seattle,_1973Where did the idea of retirement at age 65 come from?

Retirement is really a 20th Century concept since people worked on their farm until they passed away. “The story of retirement is ultimately a history of trends in labor force participation of older men (since women only entered the workforce in large numbers in the late 20th century).”

Before it was a question of how much older a person might live after they stopped working, either because of health or finding a job. “Jumping directly into retirement while living longer (and spending more time in school [while young]) means that the average percentage of an American male’s life in the labor force has declined from about two-thirds of life expectancy in 1950 to one-half of a lifetime today. And paying for half a life of leisure (my emphasis) can get expensive.”

So why 65? In the 1800’s, pensions were granted at 65 to Union soldiers, and set at 65 in 1916 in Germany. In those days, 65 was chosen since it appeared that is when men lost their productive ability. Thus age 65 has become a strong anchoring point for reference for most people. In the 1990’s age 55 was also a strong anchoring point and those retiring at that referenced age was quite high. “Despite big increases in life expectancy, many remain fixated on retirement age reference points established during the Jazz Age.”

“Think of the retirement decision as a scale. On one side you have a year spent traveling, spending time with friends, catching up on home projects and playing golf. On the other side you have a year spent hanging out with colleagues, solving work problems, dealing with your boss and making an additional year’s worth of salary. Which would make you happier?” The answer is a personal choice many make. With pensions the decision often came down to working beyond retirement age for just a small increase in income (compared to the pension), or retire and have more time for other activities for a small reduction in income pensions provided.

Today the decision is often based on whether one has saved up enough to sustain the standard of living one wants or currently has. Hopefully unexpected events like job loss or health allow one to stay working long enough to meet that goal. Fully 49% are forced into retirement earlier than planned (EBRI study).

Moral of the story: When you retire is a personal choice and in the 21st Century is not connected to any specific age for most. Even those with pensions may choose to actually stop working at some age other than the age the pension is based on. With pensions slowly declining in use, it is incumbent upon each to plan on how and when they’re going to retire, if at all. And with that idea in mind, also plan on the contingency (1 out of 2) that one may be forced into retirement earlier than planned (so what’s the plan going to be then?).

How are you going to fund all those years not working, by choice or not?


Article source: The Evolving Idea of Retirement: History provides perspective for making retirement decisions today by Michael Finke

Photo source: By Seattle Municipal Archives from Seattle, WA (Senior Citizen’s Valentine Day dance, 1973) [CC BY 2.0], via Wikimedia Commons

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