I HAVE A MILESTONE birthday this month—turning age 65. This has long been considered the standard retirement age.
When the Social Security Act was signed into law in 1935, 65 was the age at which workers could receive retirement benefits. Many companies’ defined benefit pension plans still use 65 as the age at which employees can receive an unreduced pension. And 65 is the age at which folks become eligible for Medicare.
This is also the median age at which workers expect to retire, according to the Employee Benefit Research Institute. Its annual survey, however, regularly finds that workers’ expectations don’t match reality: The median retirement age is, in fact, 62.
Why do so many workers end up retiring earlier than they expected? Some are forced into early retirement by ill-health. Sometimes, their job disappears. The pandemic is also cited as the reason so many have lately opted to retire. I feel like I’ve had a front row seat from which to observe these changes in the work world and also our changing conception of retirement.
During my final years in the workforce, I saw a trend toward hiring younger workers. In some ways, this made sense. We were a technology-driven firm, and young software engineers became a bigger part of the company’s workforce. The government systems we worked on had also matured, and the company didn’t need as many senior engineers to maintain and enhance those systems. I spent my last few years in the workforce winding down a major systems engineering program. Fifty employees had to be let go. Many found other jobs, but some decided to start retirement, albeit a bit earlier than they had planned.
That was a few years before the pandemic, which has further transformed the work and retirement landscape. It seems many older workers decided they’d had enough and were ready for something else.
While the retirement age was set at 65 when Social Security was created, that changed with legislation passed in 1983. In the years since, the full retirement age has gradually climbed. For instance, for anyone born in 1960 or later, the full retirement age is now 67.
This gradual rise in the full Social Security retirement age has changed retiree behavior. Among those signing up for benefits in 2005, 54% of women and 50% of men were age 62, the earliest possible age. But by 2018, those figures had fallen to 31% for women and 27% for men. It seems retirees are heeding the message that claiming early means a permanent reduction in their monthly government check.
Folks are also approaching retirement differently. Last year, my wife did what workers have traditionally done—go cold turkey. Quitting her job was a great decision for her, and she says she’s never felt such peace of mind. But I’ve taken a more gradual approach, moving from fulltime employment to part-time gigs as a way to ease the transition and keep some income coming in. This has, for me, made the shift to retirement much easier to cope with.
Glad you were able to have a positive cash flow to sixty five, and continue the mailbox flow. I have not worked a lick since a forced package and right size reduction took place over a decade ago. Plenty of time to putter around and check in with the HD readers to learn what’s going on. Grocery shopping has taken on a whole new meaning with no rush to the self check out while catching up on the local news from the retired Kroger workers looking for a bargain. Thanks for the post Richard, and welcome to the next chapter. There is so much to do.
I fully support the “ramp-down” strategy, if that is available. It allows you to stretch out your income a little more, to gauge your financial situation and future needs better, and to gain confidence about your ability to retire the way you want to. But even then, there will come a point when all of sudden you see things especially clearly, and you will just say to yourself “it’s time!”
Happy birthday, Richard!
So many benefits to easing yourself into the cooler waters of retirement if you’re able.
I personally think semi-retirement, second act, encore careers or whatever you want to call it, are underrated. It certainly has been useful to me. I am consulting part-time since “retiring” and taking a severance package from my employer 4 years ago at 62. My wife also retired early at 57 because she was burnt out at her job which was going through a reduction-in-force and challenging work environment. She loves being retired. I do a mix of remote work and occasional travel to work sites. My wife travels with me most of the time when I travel for work and we almost always find a way to tack on something fun to see and do. When I work at home, we have a home life routine if we are not doing personal travel. The extra income has protected our retirement accounts and savings and allowed us to increase our planned spending on personal travel. And the work has been satisfying for me, doing what I enjoy, giving back and staying engaged.
Just 65, Richard? Makes me feel good to be in the company of young folks😃
There are so many variables it’s nearly impossible to find the actual average retirement age, income, race even location matter. College or no college matters too. Non-college, lower income, non-white tend to retire early – because of health, but also have the lowest amount of retirement savings.
I introduced phased retirement at my employer and was one of the first to use it back in 2008. I could work no more than 20 hours a week while collecting my pension. What I did during those 20 hours didn’t go as planned and neither did the duration of the phased part. When I was finally forced to give up by a vindictive boss – before the two years – I was three months passed 67.
I laugh when I read about the retirement expectations of younger generations. Many plan to retire in their fifties, but the data on retirement savings doesn’t support that feasibility – except among government workers where 90% have defined benefit pensions funded by taxpayers who don’t and who struggle to fund their own retirement.
It’s been my experience the people at the top take care of the people at the top. I’ve been at companies where the “leaders” participate in lucrative deferred comp and/or pension schemes while at the same time move the other staff at the company to 401k type plans. The average (state/local government) pension in my state is roughly $20,000/year. I work in the private sector and have been responsible for my 401k account for decades now. There are states that pay, in my opinion, a ridiculous pension % based on their final few year’s compensation, but I don’t begrudge someone earning a $20,000 pension, probably having worked 30+ years in a low paying job to get it. I think more governments will have to move towards a defined contribution plan in the future with a grand-father clause for those somewhere on the years of service scale.
If a company wants a tax benefited, funded pension for execs it must be provided to all, or at least all non union workers. Other deferred comp plans are not secured or guaranteed as are qualified plans. The $20,000 needs to be compared with the average wage and the age most workers take retirement. The total compensation of government workers is higher then the private sector, especially when it comes to health and retirement benefits- based on BLS data.
My previous university job had an awesome phased retirement program for professors. You’d retire, start drawing your pension, and you could also teach up to 50% time (at your final salary, pro-rated) for up to five years. The university benefited because they had the experience and expertise for a few more years, especially in an environment where new replacement hires aren’t necessarily being approved.
I changed jobs at age 48, and my current position does not have this program. I still feel a twinge of regret occasionally, but the new job has other advantages.
Sometimes one is compelled to retire after a traumatic event . The death of a parent one has taken care of for close to a decade.