Although one can cite a few instances before this date, 1883 is when retirement was essentially invented.  To help his countrymen resist a threatened takeover by Marxists, Chancellor Otto Von Bismarck of Germany announced that he would pay a pension to any nonworking German over age 65.  This was a brilliant plan not only because it was successful, but also due to its actuarial integrity.  Since very few people lived to age 65 at this time in history, very few benefits had to be paid out!  Bismarck also set the world standard for the exact year at which old age begins and established the precedent that government should pay people for growing old.

During the Industrial Revolution in the United States, the increasing emphasis on efficiency began to alter the concept of retirement.  Younger factory workers were considered more efficient and desirable than older workers, and attitudes toward older people became increasingly negative.  Many business leaders were uncomfortable throwing older workers out on the street to starve, and moved them to less critical functions in the company.  Some offered pensions or helped build company homes for older workers, but this was the exception and not the norm. 

The Great Depression changed everything.  With one-fourth of the labor force unemployed, and social unrest on the rise, something needed to be done to save the country from a revolution.  The top priority of the government became getting these angry, young people back to work.  President Franklin D. Roosevelt proposed the Social Security Act of 1935, which made workers pay for their own retirement benefits.  The main goal of the legislation was to reduce unemployment by permanently removing the majority of older people from the workforce.  By 1940, 56% of men over age 65 were no longer in the workforce.

World War II put every employable person back to work.  Young and old, men and women, everyone was needed in the work force, and America was at full employment again.  When the war ended, older workers were expected to step aside to provide jobs for the returning veterans.  But with social security providing low benefits and relatively few pension plans, many older people could not afford to stop working. 

Initially it was believed that retired workers would enjoy sitting around doing nothing, taking a needed break from demanding physical labor.  However, most retired people wished they had more to do. Retiring to a life of doing nothing had little appeal.  The leisure industry stepped in to solve the problem.  Retirement communities began to appear, leisure activities became affordable to the middle-class, and movies and television began to fill up empty days.  Retirement was “sold” as a well-earned reward for years of dedicated service, but in reality was a way for government and business to meet their productivity and employment objectives.

Stay tuned to our blog for a continuation of this discussion, or click on the link to be directed to our research article, The New Retirement.