Why do people retire at age 65?

Why do people retire at age 65?

Why do people retire at age 65?

Answers to your questions about the news.
Aug. 23 2010 12:23 PM

When I'm 65 …

Why do people retire when they do?

Retirement. Click image to expand.
Is there an optimal age at which to retire?

Republican Rep. Paul Ryan's plan to trim the deficit includes raising the retirement age—currently set to climb from 65 to 67 by 2022—to 70. Why was the age set at 65 in the first place?

It was a compromise. During the Great Depression, elderly Americans rallied behind Francis Townsend, a physician who proposed a government-funded pension plan that would send $200 a month—enough for a comfortable, middle-class lifestyle—to all citizens over the age of 60 and require them to spend the entire check within 30 days of receiving it. The customary retirement age, however, was quite a bit higher. Thirty states had old-age pension laws in 1934. In about half, retirees aged 65 and above were eligible for aid. In the rest, the minimum age was 70. President Roosevelt thought Townsend's proposal of 60 was too low (and that the whole plan was fiscally irresponsible) but felt that 70 was too extreme, so he pushed for the middle path. When the Social Security Act passed in 1935, it specified 65 as the age at which retirees could receive full benefits.

Age 65 was also in keeping with the pension plans offered in the private sector. There was no scientific study conducted to confirm that 65 was optimal, but factory managers observed that workers started having trouble keeping up with the pace of the assembly line around then. Managers could have determined the proper retirement age for employees on a case-by-case basis—depending on the individual's abilities—but this method seemed too time-consuming and therefore not cost-effective, so many companies picked 65 and hoped it was more or less right for a majority of employees.

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Some European countries already had social insurance programs by the 1930s, and these also generally provided for retirees after age 65 or 70. Otto von Bismarck established the first-ever social security program in Germany in 1889, for citizens above age 70 (Germany lowered the age to 65 in 1916).

Life expectancy in the 1930s was 58 for men and 62 for women, suggesting, on the face of it, that most wouldn't live long enough to collect their first Social Security check. However, those numbers are skewed by high infant- and childhood-mortality rates, and roughly 55 percent of those who reached adulthood could expect to survive into their mid-60s. Men who made it to 65 lived to be 77 on average and women lived to be 79, giving them more than a decade to enjoy the benefits of Social Security. Today, life expectancy in the United States is 75 for men and 81 for women at birth, 82 for men and 86 for women at age 65.

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Explainer thanks Daniel Béland of the University of Saskatchewan and Eileen Boris of the University of California–Santa Barbara.

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