May 21


Retirement Age – is an Antiquated Concept!

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Every time I think about retirement ages I realise how stupid an "official" retirement age is. Supposedly adopted by the "Iron Chancellor," Otto von Bismark of Germany in the 1880's.  A social security system to appeal to the German working class.


The legend goes that he had many political rivals who were older than 65. So what better way to get rid of them than force them out of office. Nothing much has changed in the world of political backstabbing and shenanigans in the last 130 odd years!

The other major difference from today was that Bismark knew that the program would not cost a lot. The average German worker never reached 65, and many of those who did only lived a few years beyond that age.

The idea introduced, in 1881 by Germany's Emperor, in a letter to the German Parliament. Wilhelm wrote: 

". . . those who are disabled from work by age and invalidity have a well-grounded claim to care from the state."

The comment "disabled from work" is understandable. At that time many of the jobs in industry were manual. With oppressive working conditions. Life was tough and disease was rife.

One persistent myth about the German program is that it adopted age 65 as the standard retirement age because that was Bismarck's age. At the start Germany set 70 as the retirement age and Bismarck himself was 74 at the time.

Lowering it 27 years later to 65 years. By that time, Bismarck had been dead for 18 years!

The US Retirement Age 

The United States passed the social security law in 1935. When, at the time when, the average life expectancy in America was only 61.7 years.

The German model was not an influence on the US Committee when it proposed age 65 as the retirement age. The decision was not based on any philosophical principle or European precedent.

The federal Railroad Retirement System passed by Congress earlier in 1934, used age 65 as its retirement age. Taking this into account, the planners made a rough judgment that age 65 was more reasonable than age 70.

Actuarial studies then confirmed this decision. A logical conclusion when the average life expectancy is only 62 years!

The studies showed that using age 65 produced a manageable system. Self-sustaining with only modest levels of payroll taxation. So these two factors 

  • a kind of pragmatic “thumb suck” about prevailing retirement standards and 
  • the favorable actuarial outcome of using age 65,

combined to be the basis for age 65 chosen as the age for retirement under Social Security.

The Evolution

Unfortunately the initial process was not updated and reassessed. But more and more benefits were granted. Without evaluating where the funds would come from.

In the early days social security was limited to workers in commerce and industry. But over the years the program expanded and liberalized to cover widows. Then the entire working population, and then certain disabled people under age 65. With the most dramatic change coming in the early 1970's. The program linked to inflation. A system whereby annual benefits increased in line with rising prices.

More people. Getting more. While the 1935 average life expectancy in the US increased from under 62 years to about 78 years today. 

So on this basis wouldn’t it reasonable and logical to now have an official retirement age of at least 75?

A manageable system in 1935 polluted was by politicians making short term decisions. Manipulated by labour unions and businesses without understanding the long term implications.

Today we live with the consequences. 

By between 2025 and 2034 the Social Security Trust will be depleted. At that point the amount received by Social security will cover about 75% of the current payments.

To sustain the system someone, somewhere in the economy will have to pay. 

About the author

A "nevertiree" facing the same retirement challenges as many others. Let's discover how retirement planning can put you on the path to a create the retirement lifestyle and happiness you deserve and dream about.

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