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Retirement Age

Did you know that the trend to having a long retirement has been recent.  Today, many retirees could spend 25% or more of their life in retirement.  If you factor in childhood, many retirees spend less than 50% of their life in the workforce.  Recent retirees have been able to do this because of the increase in the stock market and real estate helped fund their retirement along with Social Security and pension benefits.  Yet, future generations may not be as fortunate.  With companies terminating their pension plans in favor of 401(k) plans and with possible changes to Social Security benefits, many post-baby boomers are wondering how they can afford their retirement. 

As a society we may have pushed the limits of living a long leisurely retirement.  If we believe that prosperity starts with giving, than only working for 50% of one's lifetime may be pushing the limits of how little we give for a long retirement.   This is why so many Americans are expecting to work at least part-time in retirement.

Yet, if one works hard, don't they have they right to retire at 65?  The age 65 retirement age, has only been around for a relatively short time.  At the beginning of the century, Social Security and pension plans did not exist.  So the trend to a longer retirement has been a recent one.  Per ElderWeb, the average retirement age has more than doubled in this century.

Year
Working Years
Average Retirement Age
Years in Retirement
1910
54
74
7
1940
50
70
10
1970
45
65
13
2000
42
62
18

Note, when the average retirement age was 74, many people did not live to see their retirement because the average life expectancy was approximately 50 years, as shown below per EFMoody:

 
Life Expectancy at Birth
Life Expectancy at Age 65
Year
Male
Female
Male
Female
1910
49.9
53.2
11.2
12.0
1940
61.6
65.9
12.1
13.6
1970
67.0
74.6
13.0
16.8
1997
73.6
79.4
15.9
19.2

So, not only are people living to have a retirement, the number of years in retirement have also increased.  Although, as mentioned above, the trend towards a longer retirement, will probably be leveling off.  There are several factors that will impact how long future generations live in retirement, including:

  • Companies in the 80's and 90's offered incentives to employees approaching retirement age as a way to reduce their workforce in order to open up opportunities to the baby boomers.   Due to the prospect of a shrinking labor pool as baby boomers near retirement, companies are now looking for ways to retain their aging workforce.
  • Retirees who invested wisely in the 90s are able to retire early with the support of Social Security and company pension plan benefits.  With recent stock market performance and company pension plans being cut back, many workers may need to work longer to ensure a secure retirement.
  • Cut backs in Social Security and increase in medical cost may cause some workers to delay their retirement.  Per Susan Grad and GAO, Social Security makes up 42% of a retirees income.  For low income retires, this can average as high as 81%.  So if there are any significant changes to Social Security benefits or retirement age, there will be significant changes in when workers retire.
  • Life expectancy may not increase as fast in the future.  There may be increases in life expectancy as researchers find better cures to heart disease and cancer.  Yet, other factors may offset these improvements, such as obesity and skin cancer.

In 1940, 50% of 70 years old worked.  This number has decreased over time to closer to 20% in 1996.  This can be expected to increase over time.  So, if it does not look like you can retire at 65, you are probably not alone.  Thus, instead of punching the clock from 9 to 5 and waiting for retirement, you may want to find a career that you enjoy and where you want to continue to work possibly into your 70s.
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