Retirement Age Declines Again in 1990s: The Average Retirement Age Resumed Its Long-Run Decline in the 1990s after Having Leveled off during the Preceding 10 to 15 Years; the Resumption of the Decline Is Attributed Largely to a Rise in the Labor Force Participation Rate of Older Men and Women between the Mid-1980s and 2000
Gendell, Murray, Monthly Labor Review
Retirement is generally understood to be the time when people stop working and collecting a pension. A person's age at retirement is important because it is one of the determinants of both the length of one's work life and the duration of retirement. The length of the work life influences how much workers save and how much the government collects in taxes, and the duration of retirement affects expenditures from savings and pension funds (including Social Security). The length of the work lire and the duration of retirement also affect the ratio of workers to retirees, which is a key determinant of the viability of pay-as-you-go public pension funds.
Each year, the Social Security Administration calculates the mean age of workers receiving their initial retirement award or disability benefit. The calculation is made from the age data in the Agency's administrative records. Although this time series does not include pensions provided by employers or unions, it covers nearly all workers in the United States and provides valuable information about a major source of earnings: relacement income for elderly men and women who have stopped, or will soon stop, working. Still, the series is limited as an indicator of retirement in that the earliest age of eligibility for the retirement benefit is 62 and many nondisabled workers stop working before that age--some even as young as their early fifties. Also, the disability benefit is provided to qualified workers who are younger than 62 (although the number of beneficiaries is relatively small), and the Social Security retirement benefit does not require workers to leave the labor force, so that many continue to work while collecting the benefit. Therefore, it would be useful to supplement the Social Security series with one that measures the average age of elderly workers at their exit from the labor force.
Such a series has been developed, and it provides estimates, in 5-year increments since the 1950s, of the median age of men and women 50 years or older who have withdrawn from the labor force. The estimates are derived from labor force data obtained in the Current Population Survey (CPS), which affords complete coverage of the workforce in the United States. It has been shown that these two series have followed similar trajectories. (1) However, the Social Security series was previously limited to the retirement benefit. In this article, the mean age of workers 50 years or older at the initial receipt of the disability benefit has been combined with the mean age at the initial receipt of the retirement benefit in order to make the Social Security series more comparable to the labor force series than heretofore. In addition, the two series are brought up to date through the late 1990s, using the latest data available. Also brought up to date is the measure of the average length of retirement after exit from the labor force. (2)
The two series show that the average age at retirement declined in the 1990s, after having leveled off during the 1970s (Social Security series) and the 1980s (both series). This finding seems inconsistent with the contention made recently that the long-run decline in the age of retirement has reversed. (3) In what follows, the apparent inconsistency is dispelled, and it is shown that the reversal in the decline in labor force participation rates of men aged 65 or older and women aged 60 or older that has occurred since the middle of the 1980s has actually contributed to the decline in the average age at exit from the labor force during the 1990s. The analysis presented also indicates what statistical changes have to occur in order for a reversal of the decline in the average age at withdrawal from the labor force to take place. Whether such a reversal would be accompanied by a corresponding reversal in the Social Security series is uncertain. The article concludes with a review of the economic, social, and psychological factors that, together, are likely to determine whether the trend will continue or be reversed. …