The common notion of “retirement” is of an abrupt cessation of work followed by years of leisure and travel. This entry discusses retirement as a normative ideal while also considering its historical trends, processes, and measurement difficulties. It also considers how patterns of retirement correspond to demographic and economic shifts, including the rise in women's employment, changes in employer/employee relations, and effects of the Great Recession on individuals, organizations, and governments.
Retirement as a one-time, abrupt event is not as common as people may think. Rather, about half of workers taper their exit from the labor force through a reduction in work hours, a change of occupation, or reentry into the labor force after a short period of nonemployment. This suggests that for half of workers, retirement is more of a process than an event. Various ways that older workers exit the workforce are captured through terms such as bridge jobs, reversing retirement, phased retirement, and postretirement employment. These varied ways of exiting the labor force reflect older workers’ expressed preference for reduced work hours as they approach the age of eligibility for full Social Security benefits. Most reentries into the labor force happen within the first two years after individuals self-identify as either fully or partially retired. Some organizations allow workers to retire and then return to short-term employment. Those most likely to postpone retirement or engage in some kind of postretirement employment are men with no private pensions but with good jobs, good incomes, and good health.
The concept of retirement is theoretically and empirically challenging to social scientists. Researchers often operationalize the concept of retirement differently, making comparisons of rates and patterns of retirement difficult. A person can be labeled retired through self-identification, receipt of Social Security benefits, receipt of a pension, or age. Individuals can self-identify as retired or partially retired but also receive earned income from a job, a second career, or self-employment. Military personnel may retire from the service at an early age and then move into a second career, and many people receive a pension check from one organization while also receiving earned income from another. Age or receipt of Social Security benefits are also problematic as defining concepts of retirement because the Senior Citizens Freedom to Work Act of 2000 (SCFWA) allows those of full retirement age to hold a job while also receiving Social Security benefits. Finally, the retirement status of women and some men who were rarely or never employed is also theoretically problematic because it begs the question whether one can be retired with little or no employment experience. The various ways that individuals identify and move through the end-of-employment process show just how varied the meaning of “retirement” can be.
Retirement as an event was uncommon at the turn of the 20th century, primarily because of high rates of mortality, insufficient old age income, and the high percentage of workers engaged in farming. Trends over the last 100 years show a large decline in men's labor force participation in old age. In 1900, 65 percent of American men 65 and older were in the labor force; that figure had dropped to 20 percent by 2000. Over the same period, mortality rates dropped and old age income rose, as a result of private pensions and Social Security, accounting for much of the decline in labor force participation for older men. For example, in 1900 a white baby born in the United States could expect to live 52 years; for those born in 2000, this life expectancy rose to 77. The introduction of Social Security benefits and a rise in private defined-benefit plans in the 20th century provided the needed income for older Americans who were living longer than ever before.
Good health is positively correlated with working in older ages. Those in poor health tend to retire earlier than those in good health. The effect of retirement itself on physical and psychological health is unclear. Retirees report more psychological and physical symptoms than workers, but being retired may not directly cause these differences. However, the facet of retirement that may affect individuals’ mental well-being is the shift in identity from worker to nonworker, especially for men, who usually spend more time in the labor force than women. The loss of a working identity may be a source of depression in the time of adjustment that follows retirement, since retirees often are faced with more limited social and physical engagement on a daily basis.
Average age at retirement declined for most of the 20th century, although a debate exists about whether or not age at retirement has flattened out or even begun to rise modestly in the last 15 years. In the 1950s, the average age of retirement for both men and women was around 67; this dropped to less than 62 in 2000. Timing of retirement tends to cluster around Social Security eligibility ages of 62 (early retirement age) and 65 (normal retirement age for those born before 1938). However, many people retire earlier than these ages, often due to disabilities. In fact, over half of all men retire before age 65. Those who do retire earlier than the Social Security-defined normal retirement age tend to be in relatively poor health and have access to private pensions and health insurance, enabling them to cease work.
Recent legislative and judicial decisions have made it easier for Americans to work at older ages. Congress passed the SCFWA in 2000, eliminating the earnings test for Social Security recipients after normal retirement age. For those between the ages of 62 and full retirement age, Social Security payments are reduced based on any earned income. This policy shift adds tax dollars to Social Security and Medicare coffers while also allowing American workers to reduce their work hours as they exit the labor force at older ages. In addition, recent federal court rulings based on the Age Discrimination in Employment Act (ADEA) have removed some barriers for organizations to implement phased retirement and retire/rehire programs. Employers are better able to create flexible work situations that match the preferences of older employees, while also gaining additional ways to efficiently respond to market forces by adjusting their workforce.
Retirement is not simply the cessation or reduction in labor force participation; it is also a cultural ideal. The idea of retirement is entrenched in the minds of Americans as a normative experience. Public discussions about retirement expectations and the need to financially plan for retirement are ubiquitous. These discussions range from political arguments about the solvency of Social Security to financial discussions about shoring up private retirement accounts to discussions about health and leisure. The picture of a middle-class couple retiring with money in the bank, spending their golden years in good health traveling the world, is an iconic ideal to which many Americans aspire.
This ideal may be harder to achieve now, with disappearing defined-benefit pensions and eroded personal wealth due to effects of the Great Recession. Future generations of retirees, in particular, assume they will have to save more and work longer than their parents. Baby boomers just reaching retirement age expect to work longer than anticipated because of economic losses previously experienced over the last few years. Many still have mortgages to pay and often owe more than their houses are worth. Others have lost jobs and either have not been able to get another job or have been forced to work with lower pay or for reduced hours. All of these economic pressures call into question possible changes in the timing and quality of older workers’ retirement experiences.
Another reason the notion of retirement may be changing is because of a shift in the employer/employee relationship. In the mid-20th century, the experience of long-term, secure employment was common, at least for white middle-class men. Most employers offered long-term employment, with internal promotional opportunities and medical and pension benefits. Beginning in the 1970s, however, this type of strong employer-employee relationship that valued organizational tenure and loyalty began to erode. Global competition exerted pressure on companies to increase profits through downsizing, flattening organizational charts, moving operations overseas, and eliminating defined contribution pension plans. These changes gradually shifted the burden of retirement security from organizations to individual workers. Other structural contexts affect the retirement experience as well. For example, during a time of high unemployment, discouraged older workers, who have a harder time finding employment than younger workers, may choose to withdraw from the labor market altogether. If they are 62 or older, they can retire and receive Social Security benefits.
Gender is a significant sorting mechanism for employment and retirement. Roughly 60 percent of women 16 and older are in the labor force today, compared to 75 percent of men. Women tend to have varying employment trajectories over the life course, with childbearing and childcare responsibilities shaping their occupational choices and annual work hours. Married women in particular experience more varied employment history than men, due to the tendency for families to rely on women's unpaid household labor and family care.
The typical gendered division of household and familial work affects not only employment patterns but also retirement behavior. For older women, early patterns of eliminating or reducing labor force participation to care for family members result on average in lower job tenure, lower wealth, lower lifetime earnings, lower Social Security payments, and lower likelihood of private pensions, when compared to older men. These factors affect unmarried, divorced, and widowed women differently from married women, who generally derive economic protection in old age through their husbands’ accumulated wealth and old-age income. Unmarried women are more likely to continue to work in old age and to return to employment once retired, suggesting an association between old-age employment and economic vulnerability. Trends in family structure, with increases in single-parent families that are usually headed by women, also suggest that increasing numbers of women will need to delay complete retirement in the near future.
Looking forward, several factors suggest that both women and men are likely to postpone retirement or return to employment if currently retired, at least in the near term. Health and private pensions are associated with employment in old age. Older Americans who are healthy or who do not have private pensions are more likely to be employed. On one hand, the trend toward better health and longer lives suggests that people could postpone retirement beyond the current average retirement age of 62. On the other hand, employer-based health benefits are threatened, and defined-contribution pension plans are on the decline. In addition, the coffers of states, organizations, and individuals have all been diminished in the wake of the Great Recession, leading to the need for individuals to delay retirement alongside the need of organizations to trim their workforces and curtail benefits. These demographic and economic shifts affecting older workers will challenge individuals, organizations, and governments over the next few decades.
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