Are You Considering Retirement? Just What Is The Average Retirement Age?
Introduction
Since working longer is the key to a secure retirement for the vast majority of older Americans, it is useful to take a look at labor force trends for those under and over age 65 for the last century.
This brief proceeds in three steps. The first section describes the long-run decline in labor force participation of men. The second looks at the turnaround that began in the mid-1980s. The third section discusses the trends for women, which combine their increasing labor force activity, on the one hand, and incentives to retire, on the other.
The final section concludes that labor force activity of both men and women has increased significantly since the mid-1980s as many incentives now encourage work. Several hurdles remain to continued increases, however, including the sluggish economic recovery, the move away from career employment, the availability of Social Security at 62, and employer resistance to part-time employment.
The Long-term Decline in Employment Rates
The notion of retirement as a distinct and extended stage of life is a recent innovation. Up to the end of the 19th century, people generally worked as long as they could. In their prime, they put in 60 hours of work each week. And, at the end of their lives, they had only about two years of ‘retirement,’ often due to ill health.
Beginning around 1880, the percentage of the older male population at work began to decline sharply. Experts attribute this decline to an unexpected and substantial stream of income that appeared in the form of old-age pensions for Civil War veterans. A comprehensive study found that veterans eligible for these pensions had significantly higher retirement rates than the population at large.
As the veterans died off, work rates did not return to their previous levels. Various analysts argue that this trend reflects the growth of workers’ incomes. But employer attitudes were also becoming important. The US workforce was rapidly shifting from self-employment, most notably in agriculture, to employees of large enterprises. Employers increasingly introduced mandatory retirement ages for their employees. And they were reluctant to hire older workers, especially during the Great Depression.
The next big decline in the work rates of older men occurred after World War II. One obvious factor was the availability of Social Security benefits. The legislation was enacted in 1935; Old Age welfare benefits were paid almost immediately and Social Security retirement benefits began in 1940. The postwar period also saw the expansion of employer pensions, as union power grew and corporations increasingly saw pensions as a crucial component of their personnel systems.
The introduction of Medicare in 1965 and the sharp increase in Social Security benefits in 1972 probably led to the final leg of the decline in workforce activity of older men. And, because benefits were available at 62, Social Security may also explain part of the decline in workforce activity for men 55-64.
The Recent Reversal
The downward trajectory stopped around the mid-1980s, and since then the labor force participation of men both 55-64 and 65 and over has gradually increased. Many factors help explain this turnaround.
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