Retirement has changed considerably since the 1960s, especially when it comes to the reasons for retiring and the age at which to stop participating in the labor force.
But now, as the average retirement age begins to level off, this is suggesting that earlier drivers of working longer are no longer having a substantial impact on when to retire, according to a recent report from the Boston College Center for Retirement Research (CRR).
Average retirement age is defined as the age at which the labor force participation rate drops below 50%, wrote CRR Director Alicia Munnell in the report “The Average Retirement Age — An Update.” Based on this definition, the average retirement age was about 64 for men and 62 for women in 2013 — the most recent year researchers analyzed.
While these ages may not be substantially older than, say a couple years ago, they are vastly greater than what they were in the 1980s. And this has largely to due with an increase in work activity among older people driven in response to a variety of factors, including Social Security program changes, improved health and longevity, as well as other reasons.
The introduction of Medicare in 1965 and the sharp increase in Social Security benefits in 1972 may have contributed to the decline in workforce activity among older men ages 65 and older, however, the downward trajectory stopped around the mid-1980s, according to the CRR findings. Since then, the labor force participation of men ages 55-64 and those age 65 and older has gradually increased.
Program changes to Social Security made work more attractive relative to retirement, wrote Munnell.
“The liberalization, and for some the elimination, of the earnings test removed what many saw as an impediment to continued work,” she wrote. “The delayed retirement credit, which increases benefits for each year that claiming is delayed between the Full Retirement Age and age 70, has also improved incentives to keep working.”
At ages 60 and above, participation in the labor force is now noticeably higher than in 1983. Whereas 40% of men age 65 were part of the labor force in 1983, in 2013 about 50% of 65-year-old men were still part of the labor force.
Among women, 20% of 65-year-olds were actively working in 1983, compared to about 40% in 2013. Determining trends in the average retirement age for women is complicated, however, because women’s work patterns reflect the increasing participation of cohorts over time as well as the factors that affect retirement behavior.
“The role of women changed enormously over the 20th century, and these changes had a profound effect on their labor force participation,” Munnell wrote. “Each cohort of women has spent more time in the labor force than the previous cohort, increasing the likelihood that they would be working at older ages.”
Though a higher percentage of women were in the labor force than ever before in 2013, patterns in the ever-increasing work force participation among women in their 50s were similar with participation rates of 2003, indicating that such trends may have already begun to run their course.
“Thus, changes in the work patterns of older women in the future will have more to do with retirement decisions than cohort effects,” Munnell wrote.
Despite what various reasons people may have for either postponing retirement or retiring early, researchers urge that the undisputed key to a secure retirement is working longer.
“Monthly Social Security benefits claimed at age 70 are 76 percent higher than those claimed at 62,” Munnell wrote. “The fact that people are always amazed when presented with this information suggests that a major educational initiative may be warranted.”
Written by Jason Oliva