I walk by a house with gigantic letters spelling out “Happy Retirement Sylvia” on the front lawn. There is a lot to be said for retirement. I retired 18 years ago at age 52. Fortunately, I had enough points (years of service + age) to receive a pension. I am VERY grateful for that. Even when I was working, people used to tease me that my job got in the way of my travels. So, when I did retire, I really didn’t look back. Some people become so identified with their jobs, that it is difficult for them to retire. My former boss, the treasurer of the company, died about three years after he retired because he didn’t know what to do if he wasn’t the treasurer. I have a friend whose husband recently retired and really likes to keep busy. So, now he is working for The Container Store three days a week. I do freelance editing which keeps me busy 10-20 hours a week once a quarter, which is just enough work for me. I have had no trouble finding things to do since I retired — volunteering, traveling (before the pandemic), writing a blog, cooking, etc. I don’t think retirement is the same in other countries as it is in the U.S. Let’s find out more about it.
History
According to Wikipedia, retirement — or the practice of leaving one's job or ceasing to work after reaching a certain age —has been around since the 18th century. Retirement as a government policy began to be adopted by countries during the late 19th century and the 20th century.
18th century and prior
Prior to the 18th century, the average life expectancy of people was between 26 and 40 years. Due to this, only a small percentage of the population were reaching an age where physical impairments began to be obstacles to working.
There had been a long practice beginning in the Roman empire to the modern nation states of providing pensions to those who had served in the military.
Rev. Cotton Mather — 18th century New England Puritan minister and author — proposed that elderly people should be "pleased with the retirement which you are dismissed into."
19th century
In 1883, the German chancellor, Otto Von Bismarck, in a maneuver against Marxists who were burgeoning in power and popularity, announced that anyone over 65 years old would be forced to retire and that he would pay a pension to them. It was the German Emperor William I who — at the bidding of Bismarck in 1881 — introduced the proposal for retirement in a letter to the Reichstag: "...those who are disabled from work by age and invalidity have a well-grounded claim to care from the state." Just like President Roosevelt, who would be called a “socialist” for introducing his New Deal welfare programs, Bismarck was also labelled a “socialist” for introducing these government programs. To this, Bismarck replied, "Call it socialism or whatever you like. It is the same to me." The German welfare program provided contributory retirement benefits and disability benefits. Participation in the retirement system was mandatory and contributions were taken from the employee, the employer and the government.
In the mid-1800s certain United States municipal employees, including firefighters, police and teachers, started receiving public pensions. In 1875, the American Express Co. began to offer private pensions. By the 1920s, a variety of American industries, from railroads to oil to banking, began offering pensions.
20th century
In his 1905 valedictory address to the Johns Hopkins Hospital, the eminent Canadian physician William Osler expressed his conviction that a man's best work was done before he was 40 years old, and that by age 60, he should retire. He called the ages between 25 and 40 the "15 golden years of plenty." Workers between ages 40 and 60 were tolerable because they were "merely uncreative." But after age 60, the average worker was useless and should be put out to pasture.
Retirement as a concept began to be widely adopted in the United States after the period of the Industrial Revolution, where numerous aging factory workers began to show signs of aging: slowing down assembly lines, taking excessive sick days and usurping the spots of more youthful, more profitable men with families to bolster. Also, older workers brought about unemployment among the youthful population by declining to resign. The Great Depression exacerbated things. Though retirement was viewed by some as an essential adjustment, many among the older populace resisted the idea of retirement.
By 1935, the idea that in order to get old individuals to quit working for pay was to pay them enough to quit working became widespread. A Californian, Francis Townsend, proposed a plan offering compulsory retirement at age 60. In return, the legislature would pay benefits of up to $200 a month, a sum identical to full pay for a center pay laborer. In response to this, President Franklin D. Roosevelt proposed the Social Security Act of 1935, which made workers pay for their own particular retirement.
Eleanor Roosevelt said hopefully of retirees, "Old people love their own things even more than young people do. It means so much to sit in the same chair you sat in for a great many years." However, most resigned individuals wished they could work. The issue was still intense in 1951, when the Corning Co. assembled a round table to make sense of how to make retirement more popular. At that gathering, the writer and student of Eastern and Western cultures, Santha Rama Rau, observed that Americans did not have the ability to appreciate doing nothing.
By 1910, Florida got to be distinctly available as a retirement destination to the white-collar class. Retirement communities started to show up in the 1920s and 30s. The explosion of golf courses, and the onset of films and TV transformed having nothing to do into a leisure time activity. The distribution in 1955 of Senior Citizen magazine — which quickly went defunct — contained the first popular usage of the phrase "senior citizen."
Senior citizen is a common euphemism for an old person used in American English and sometimes in British English. It implies that the person being referred to is retired. This in turn usually implies that the person is over the retirement age, which varies according to country. Synonyms include old age pensioner or pensioner in British English and retiree and senior in American English. Some dictionaries describe widespread use of "senior citizen" for people over the age of 65.
When defined in an official context, senior citizen is often used for legal or policy-related reasons in determining who is eligible for certain benefits available to the age group.
It is used in general usage instead of traditional terms such as old person, old-age pensioner or elderly as a courtesy and to signify continuing relevance of and respect for this population group as "citizens" of society of senior rank.
The term was apparently coined in 1938 during a political campaign. Famed caricaturist Al Hirschfeld claimed on several occasion that his father Isaac Hirschfeld invented the term “senior citizen.” It has come into widespread use in recent decades in legislation, commerce and common speech. Especially in less formal contexts, it is often abbreviated as "senior(s)," which is also used as an adjective.
In commerce, some businesses offer customers of a certain age a "senior discount." The age at which these discounts are available varies between 55, 60, 62 or 65, and other criteria may also apply. Sometimes a special "senior discount card" or other proof of age needs to be obtained and produced to show entitlement.
In 1999, The American Association of Retired Persons dropped "Retired" from its name and turned into "AARP Inc." to reflect that its focus was no longer American retirees.
Present day
According to the Mental Health Foundation, one in five of present-day retirees experiences depression. Those living alone because of beravement or divorce are more at risk. Physical health problems can also make people more vulnerable to mental health issues. Recent studies have indicated that "retirement increases the chances of suffering from clinical depression by around 40 percent, and of having at least one diagnosed physical illness by 60 percent." On the other hand, many workers have adopted scaling back on their jobs at around 55 or 60 — or even changing careers — but still working for 15–20 more years.
Retirement age
A person may retire at whatever age they please. However, a country's tax laws or state old-age pension rules usually mean that in a given country a certain age is thought of as the standard retirement age. As life expectancy increases and more and more people live to an advanced age, in many countries the age at which a pension is awarded has been increased in the 21st century, often progressively.
The standard retirement age varies from country to country but it is generally between 50 and 70, according to latest statistics, 2011. In some countries this age is different for men and women, although this has recently been challenged in some countries (e.g., Austria), and in some countries the ages are being brought into line.
According to the Organization for Economic Cooperation and Development, early retirement age ranges from none in Latvia to 57 in Italy to 65 in the United Kingdom. In Denmark, early retirement is called efterløn, and there are some requirements to be met. Early and normal retirement ages vary according to the date of birth of the person filing for retirement. In Spain it was ruled that the retirement age was to increase from 65 to 67 progressively from 2013 to 2027. Normal retirement age ranges from 55 in Cambodia to 67 in Germany, Greece, Italy and the United States. The percentage of people employed between the ages of 60 and 64 ranges from 1% in Cambodia to 58% in Sweden.
In the United States, while the normal retirement age for Social Security or Old Age Survivors Insurance was age 65 to receive unreduced benefits, it is gradually increasing to age 67 by 2027. Public servants are often not covered by Social Security but have their own pension programs. Police officers in the United States may typically retire at half pay after 20 years of service, or three-quarter pay after 30 years, allowing retirement from the early 40s. Military members of the U.S. Armed Forces may elect to retire after 20 years of active duty. Their retirement pay — not a pension since they can be recalled to active duty at any time — is calculated on number of years on active duty, final pay grade and the retirement system in place when they entered service. Members awarded the Medal of Honor qualify for a separate stipend. Retirement pay for military members in the reserve and U.S. National Guard is based on a point system.
Factors affecting retirement decisions
Many factors affect people's retirement decisions. Retirement funding education is a big factor that affects the success of an individual's retirement experience. Social Security clearly plays an important role because most individuals solely rely on Social Security as their only retirement option, when both Social Security's trust funds are expected to be depleted by 2034. Knowledge affects an individual's retirement decisions by simply finding more reliable retirement options such as, individual retirement accounts or employer-sponsored plans. In countries around the world, people are much more likely to retire at the early and normal retirement ages of the public pension system e.g., ages 62 and 65 in the U.S. This pattern cannot be explained by different financial incentives to retire at these ages since typically retirement benefits at these ages are approximately actuarially fair; that is, the present value of lifetime pension benefits or pension wealth conditional on retiring at age a is approximately the same as pension wealth conditional on retiring one year later at age a+1. Nevertheless, a large literature has found that individuals respond significantly to financial incentives relating to retirement e.g., to discontinuities stemming from the Social Security earnings test or the tax system.
Greater wealth tends to lead to earlier retirement, since wealthier individuals can essentially "purchase" additional leisure. Generally, the effect of wealth on retirement is difficult to estimate empirically since observing greater wealth at older ages may be the result of increased saving over the working life in anticipation of earlier retirement. However, many economists have found creative ways to estimate wealth effects on retirement and typically find that they are small. For example, one paper exploits the receipt of an inheritance to measure the effect of wealth shocks on retirement using data from the Health and Retirement Study, a longitudinal project sponsored by the National Institute on Aging and the Social Security Administration. The authors find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points or 12% relative to the baseline retirement rate over an eight-year period.
TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt or T-bills. TED is an acronym formed from T-bill and ED, the ticker symbol for the Eurodollar futures contract. The TED spread in red in the graph above — an indicator of perceived credit risk in the general economy — increased significantly during the 2007-2008 financial crisis, reflecting an increase in perceived credit risk. The TED spread spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4.65% on October 10, 2008.
A great deal of attention has surrounded how the financial crisis of 2007-2008 and subsequent Great Recession are affecting retirement decisions, with the conventional wisdom saying that fewer people will retire since their savings have been depleted; however recent research suggests that the opposite may happen. Using data from the HRS, researchers examined trends in defined benefit vs. defined contribution pension plans and found that those nearing retirement had only limited exposure to the recent stock market decline and thus are not likely to substantially delay their retirement. At the same time, using data from the Current Population Survey, another study estimates that mass layoffs are likely to lead to an increase in retirement almost 50% larger than the decrease brought about by the stock market crash, so that net retirements are likely to increase in response to the crisis.
More information tells of how many who retire will continue to work, but not in the career they have had for the majority of their life. Job openings will increase in the next 5 years due to retirements of the baby boomer generation. The over-50 population is actually the fastest growing labor group in the U.S.
A great deal of research has examined the effects of health status and health shocks on retirement. It is widely found that individuals in poor health generally retire earlier than those in better health. This does not necessarily imply that poor health status leads people to retire earlier, since in surveys retirees may be more likely to exaggerate their poor health status to justify their earlier decision to retire. This justification bias, however, is likely to be small. In general, declining health over time — as well as the onset of new health conditions — have been found to be positively related to earlier retirement. Health conditions that can cause someone to retire include hypertension or high blood pressure, diabetes mellitus, sleep apnea, joint diseases and hyperlipidemia.
Most people are married when they reach retirement age; thus, spouse's employment status may affect one's decision to retire. On average, husbands are three years older than their wives in the U.S., and spouses often coordinate their retirement decisions. Thus, men are more likely to retire if their wives are also retired than if they are still in the labor force, and vice versa.
Saving for retirement
Overall, income after retirement can come from state pensions, occupational pensions, private savings and investments — private pension funds, owned housing, donations (e.g., by children) and social benefits. In some countries, an additional lump sum is granted, according to the years of work and the average pay; this is usually provided by the employer. On a personal level, the rising cost of living during retirement is a serious concern to many older adults. Health care costs play an important role.
Provision of state pensions is a significant drain on a government's budget. As life expectancy increases and the health of older people improves with medical advances, the age of entitlement to a pension has been increasing progressively since about 2010.
Older people have poorer health, and the cost of health care in retirement is large. Most countries provide universal health insurance coverage for seniors, although in the United States many people retire before they become eligible for Medicare health coverage at age 65.
Life after retirement
Retirement might coincide with important life changes; a retired worker might move to a new location, for example a retirement community, thereby having less frequent contact with their previous social context and adopting a new lifestyle. Often retirees volunteer for charities and other community organizations. Tourism is a common marker of retirement and for some becomes a way of life, such as for so-called grey nomads. Some retired people even choose to go and live in warmer climates in what is known as retirement migration.
It has been found that Americans have six lifestyle choices as they age: continuing to work full-time, continuing to work part-time, retiring from work and becoming engaged in a variety of leisure activities, retiring from work and becoming involved in a variety of recreational and leisure activities, retiring from work and later returning to work part-time and retiring from work and later returning to work full-time. An important note to make from these lifestyle definitions are that four of the six involve working. America is facing an important demographic change in that the baby boomer generation is now reaching retirement age. This poses two challenges: whether there will be a sufficient number of skilled workers in the work force, and whether the current pension programs will be sufficient to support the growing number of retired people. The reasons that some people choose to never retire, or to return to work after retiring include not only the difficulty of planning for retirement but also wages and fringe benefits, expenditure of physical and mental energy, production of goods and services, social interaction and social status may interact to influence an individual's work force participation decision.
Often retirees are called upon to care for grandchildren and occasionally aged parents. For many it gives them more time to devote to a hobby or sport such as golf or sailing. On the other hand, many retirees feel restless and suffer from depression as a result of their new situation. Although it is not scientifically possible to directly show that retirement either causes or contributes to depression, the newly retired are one of the most vulnerable societal groups when it comes to depression most likely due to confluence of increasing age and deteriorating health status. Retirement coincides with deterioration of one's health that correlates with increasing age, and this likely plays a major role in increased rates of depression in retirees. Longitudinal and cross-sectional studies have shown that healthy elderly and retired people are as happy or happier and have an equal quality of life as they age as compared to younger employed adults, therefore retirement in and of itself is not likely to contribute to development of depression.
Many people in the later years of their lives, due to failing health, require assistance, sometimes in extremely expensive treatments – in some countries – being provided in a nursing home. Those who need care, but are not in need of constant assistance, may choose to live in a retirement home.
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