Retirement is a relatively new concept that has been around for less than 200 years. In the past, there were no comfortable, leisurely retirement years to look forward to after 30 years of employment. There were barely any old people, either. Life expectancy was low and hardly anyone lived past 65 years. So there was no need for it. But then came Otto von Bismarck, a man with a radical idea…
How It All Started
It all started in 1881 in Prussia. The conservative minister president, Otto von Bismarck, wanted to do better by his people. He was under pressure from his socialist opponents, so he suggested a radical idea to the Reichstag: a government-run system to financially support the older members of Prussian society.
This was the first the world heard of what is known today as retirement. The idea seemed crazy at the time because people just didn’t retire back then. If you were lucky to still be alive in old age, you worked. You probably still worked on the farm, or if you were wealthy enough, you managed the farm or larger estate.
But Bismarck suggested that those who were disabled by age and could not work should be cared for by the state. The people loved it. Though it took another eight years, the German government was the first to create a retirement system for the citizens who were lucky enough to make it to age 70. This retirement age, at the time, was just about aligned with life expectancy—not very many people lived that long.
The Early Years of Pensions and Social Security
In the 1800s, military pensions had long been provided to the brave soldiers who risked their lives in battle, though these pensions weren’t necessarily large enough to mean that they could stop working altogether and “retire.” And in the mid-1800s in America, certain government employees, such as police, teachers, and firefighters—mostly in big cities—started receiving similar pensions, too. In 1875, the American Express Company was the first to offer a private pension to its employees.
Years later, pensions became more commonplace. By the 1920s, many American industries such as banking, oil, and railroads were beginning to promise their employees some type of financial support for their later years. People were typically able to cash in on these pension plans at age 65, mostly because people could keep working well into their 60s—old age didn’t necessarily mean bad health.
However, research was conducted that documented a mental decline starting at age 60 and people also believed that by age 60, they had certainly done their best work and should move on to give jobs to the next generation. So when the federal government created what is now known as Social Security, many of the policies suggested that retirement age should be 60, or even earlier. Unfortunately, though, the economics of the age didn’t quite work. And in 1935, when the Social Security Act was passed, the official age to retire was pegged at 65, even though the average life expectancy for American men was at about 58 years old at the time.
The Post-War Boom and Life Expectancy
However, the balance changed shortly thereafter when the Depression ended; wealth improved, and so did medicine. During this post-war boom, Americans suddenly started to live longer. By the year 1960, life expectancy had increased to almost 70*.
People were now living past the age when they were able to stop working and actually had the money to do it thanks to their pensions and Social Security benefits. So, Americans started retiring in large numbers. They stopped working and they started embracing leisure. The concept of retirement was in full bloom. Now, there are an estimated 39.5 million retired Americans according to the Social Security Administration.
*current life expectancy is 78.8 years
