The Origin of the Retirement Age 65
Chancellor Otto von Bismarck of Germany in the 1880s was faced with Marxist unrest whereby most of the countrymen in German were demanding for socialist reforms (Wise, 2016). The unrest forced Bismarck to concoct a social insurance program whereby the government was to contribute to the pensions of the older Germans that were not working. On this end, Germany became the first nation in adopting the social insurance program in the late 1880s. Notably, one of the myths about the German social insurance program is that it had to adopt age 65 as being the standard age of retirement since the emperor retired at this age as well. However, this would be refuted by the fact that the initial age of retirement had been set at seventy years at the time when Bismarck was seventy-four years old (Wise, 2016). In 1916, twenty-seven years later, the age would be lowered to 65 years when the emperor had already died eighteen years earlier.
Critically to note is that in 1935, during the time that America was introducing social insurance, the system in Germany was using age 65 as the standard age of retirement (Wise, 2016). Under Social Security, this would not be termed as one of the major influences on the Committee on Economic Security (CES) after age 65 was proposed. At this time, the decision to have this age as the standard retirement age was not pegged on any European precedent or philosophical principles. The decision was in fact a pragmatic one and which was coming from two sources. The first source was a generalized observation on the prevailing ages of retirement in some of the few private systems of pension that were in existence in this particular time and the second was the thirty state old-age pension systems that were in operation by then. Accordingly, close to fifty percent of the state pension systems were making use of age sixty-five as their age of retirement while the rest were using age seventy.
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At the same time, the new Federal Railroad Retirement System that was passed by the Congress in early 1934 was as well using age 65 as the age of retirement (Lumsdaine et al., 2015). After taking the aforementioned issues, the CES planners decided to make a rough judgment that age sixty-five was possibly more suitable for the retirement age compared to age seventy (Wise, 2016). The ruling by the CES would later be confirmed by the actuarial studies, which showed that through the use of this age, the manageable system would be produced due to the easy application of self-sustaining and modest levels of payroll taxation. Therefore, the two factors including the pragmatic judgment on the existing standards of retirement age as well as the favorable actuarial outcome on the use of age sixty-five played a critical role in confirming the basis for making this age the standard age of retirement under the Social Security.
Does This Age Still Work?
Although age 65 has been fixed as the standard retirement age, it must be remembered that other considerations also inform the most suitable time for individuals to retire. Important to emphasize is that there is no single and fixed age for employees to retire. For those who are employed, their retirement age is set out in their contract of employment. Some of such employment contract contains mandatory age of retirement but at the same time having provisions for general earlier retirement or on the grounds of illnesses. In most organizations, however, the standard age of retirement is sixty-five years. Others included early retirement ages of fifty-five, sixty or sixty-two years (Wise, 2016). At the same time, some jobs are under statutory provisions whereby they follow the statutory retirement age. In such positions which are established by law, the age or retirement is also set by the same law such as seventy years as the maximum age. On the other hand, there is no fixed age of retirement for those who are self-employed. In this way, the flexibility in the employment-related laws has made it challenging for the retirement age 65 to work.
More People Are Working Past the Age of 65
Studies have shown that fewer Americans are counting on retiring by age sixty-five (Bowman, 2012) . Notably, a big number of Americans are currently working on their late and beyond the sixties which is a growing trend that has been continuing despite experiencing tight job market. According to The Urban Institute’s Program on Retirement Policy’s director, Richard Johnson, this is one of the significant changes in today’s labor force. In a study conducted in 2015 by the Bureau of Labor Statistics, more than eighteen percent of Americans are working past sixty-five years of age, and the trend is expected to continue into the future.
Retirement is not as Stress Free as Portrayed in the Media
Unlike the common knowledge that retirement is the time to enjoy what one has earned in earlier years, it has been found that this is not the case for some retirees (Wise, 2016). Apparently, there are other factors that determine the pleasure to be enjoyed in retirement. One of these factors is financial stability during and after retirement since some end up facilitating their loans that eat into their savings. Diseases are also taking a big chunk of retirees’ savings such as cancer, diabetes, high blood pressure among others.
References
Bowman, F. J. (2012). The complete retirement handbook: For anyone who will ever retire .
Lexington: The University Press of Kentucky.
Lumsdaine, R. L., Stock, J. H., Wise, D. A., & National Bureau of Economic Research. (2015).
Why are retirement rates so high at age 65? Cambridge, MA: National Bureau of
Economic Research.
Wise, D. A. (2016). Advances in the economics of aging . Chicago: University of Chicago Press.
