Retirement Trends, Employer Pensions and Public Policy

1983

Recent trends toward earlier retirement have exacerbated the financial problems facing the Social Security system and many other public and private pension plans. The massive. commitment of public and private funds to Social Security and pension funds is-partly responsible for the,trend to early retirement. This, in fact, was one of the early goals of Social Security: to induce old9r workers out of the weaklabor-markets of,the 1930's. Now, however, the age distribution has changed and the population of retirees has risen. There are three general approaches to bolstering the Social Security System: (1) an increase in employee contributions; (2) a decrease in the schedule of benefits, or delay of eligibility; and (3) an alteration in public policy to induce later retirement. The benefit structure oi Social ,Secueity and Rehsion plans often provides strong financial incentives to retire precisely at the mandatory age: the carrot and stick are frequently applied simultaneously. To observe actual labor ,Force transition behavior, adults employed in 1973 who did not fate mandatory .

Ensuring Health and Income Security for an Aging Workforce, 2001

The trend toward earlier and earlier retirement was one of the most important labor market developments of the twentieth century. It was evident in all the major industrialized countries. In the United States, however, the trend toward earlier retirement came to at least a temporary halt in the mid-1980s. Male participation rates at older ages have stabilized or even increased slightly. Older women's participation rates are clearly rising. This paper examines the environmental and policy changes contributing to the long-term decline in the U.S. retirement age as well as developments that contributed to the recent reversal. The dominant source of earlier retirement was the long-term increase in Americans' wealth, which permitted workers to enjoy rising living standards even as they spent a growing percentage of their lives outside the paid work force. The expansion of Social Security pensions and of employer-sponsored pension plans and the introduction of mandatory retirement rules also encouraged earlier retirement over much of the last century. Many public policies and private institutions that encouraged early retirement have been modified in recent years. Mandatory retirement has been outlawed in most jobs. Social Security is no longer growing more generous, and worker coverage under company pension plans is no longer rising. Both Social Security and many private pensions have become more "age neutral" with respect to retirement. Public and private pension programs now provide weaker financial incentives for workers to retire at particular ages, such as age 62 or age 65, and offer stronger incentives for aging workers to remain in the labor force. The paper outlines additional policies that could encourage later retirement. An open question is whether such policies are needed. Rising labor productivity and increased work effort during the pre-retirement years mean that Americans can continue to enjoy higher living standards, even as improved longevity adds to the number of years that workers spend in retirement. If opinion polls are to be believed, most workers favor preserving the institutions that allow early retirement even if it means these institutions will require heavier contributions from active workers.

Working Papers in Economics, 1997

One of the most remarkable demographic changes in the United States during the past half-century has been the dramatic decline in the labor force participation rates of older men-the well-known early retirement trend. In 1950, nearly three-quarters of all 65 year old men were in the labor force; by 1985, less than one-third were. At age 62, the rates for men were near 80 percent in both 1950 and 1960. After 1961, when men first became eligible for Social Security benefits at age 62, the age-62 participation rate began a steady decline to near 50 percent by the mid-1980s. At age 70, the rates declined from 50 percent in 1950 to only 16 percent in 1985. Similar trends are found for other ages as well (Burkhauser and Quinn 1997; table 1). But equally remarkable has been the sudden demise of these long-run trends in the mid-1980s. Male participation rates have flattened and perhaps even turned around since 1985. The era of earlier and earlier retirement seems to have come to an abrupt halt. These changes are consistent with important policy initiatives that increased the options available to older workers and altered the relative attractiveness of work and retirement, and have been assisted by the strong macroeconomic performance of the American economy. The purpose of this article is threefold: to document the dramatic change in retirement trends that occurred in the mid-1980s, to mention some factors that may have contributed to this change, and finally, to discuss some preliminary research on the nature of retirement patterns in the 1990s-the exit routes that older Americans choose between their career jobs and complete labor force withdrawal.

Working Papers in …, 1998

The Gerontologist

The current landscape of retirement is changing dramatically as population aging becomes increasingly visible. This review of pressing retirement issues advocates research on (a) changing meanings of retirement, (b) impact of technology, (c) the role of housing in retirement, (d) human resource strategies, (e) adjustment to changing retirement policies, (f) the pension industry, and (g) the role of ethnic diversity in retirement.

Working Papers in Economics, 1999

Journal of Pension Economics and Finance, 2011

and stay healthy. Employers must address the challenges and opportunities of an aging workforce, and make workplace accommodations where necessary ; for example, some older workers prefer hours flexibility or less strenuous jobs as they age. A key player must be the government, which has already encouraged additional work late in life by lowering Social Security benefits and by eliminating what were once significant financial work disincentives at age 65. But what is really needed, according to Munnell and Sass, is an increase in the earliest age of benefit eligibility, from 62 to 64. This, they acknowledge, is a controversial recommendation, and one that would harm those who cannot work additional years (which they estimate to be 15 to 20 % of the workforce), and who tend to be vulnerable on a number of counts (health, education, wage rates and retirement benefits). There are many strengths of this slim volume. It is very well written and designed for the citizen, not for professionals in the field. It makes excellent use of graphs, charts and footnotes, where considerable technical detail and bibliographic information reside. The simple math behind the authors' major point (please consider working several more years !) is straightforward and compelling. When estimating available assets per year of retirement, additional years of work both increase the numerator (additional earnings and employer pension contributions, additional savings, and higher Social Security benefits) and decrease the denominator (years of retirement). They point out in a short summary Chapter 7 that four additional years of work can change the ratio of working years to retirement years from about 2 : 1 (40 :20) to almost 3 : 1 (44 :16). I am more optimistic than the authors that American men and women will want to and be able to work longer than they used to. In fact, they already are. Between 1950 and 1985, the labor force participation rates of men aged 62, 65, 68 and 70 declined by 37 % (81.2 to 50.9), 57 % (71.7 to 30.5), 64 % (57.7 to 20.5) and 68 % (49.8 to 15.9), one of the most dramatic demographic changes in recent history. But since then, the retirement environment has changed equally dramatically ; it's a whole new world. Social Security has eliminated strong retirement incentives, as have employers, to an extent, by largely moving from defined-benefit to definedcontribution plans, which have no age-specific retirement incentives. Mandatory retirement is gone and not coming back. People are living longer and healthier lives, jobs are less strenuous, and workplace technology has improved. How have workers responded? Between 1985 and 2008, participation rates of men 62, 65, 68 and 70 have increased by 11 % (to 56.6), 43 % (to 43.7), 45 % (to 29.8) and 52 % (to 24.1)! And female rates have increased even more for these same ages (since 1985, by 52 %, 101 %, 84 % and 90 %). In addition, the majority (over 60 %) of older Americans now retire gradually, in stages, utilizing bridge jobs on the way out, between full-time career employment and complete labor force withdrawal. The era of earlier and earlier retirement is over, and has been for 25 years. A new era has begun. I hope that this book has two impacts : encouraging middle-aged workers to think about working a few years longer and encouraging Congress to discuss an increase in Social Security's early retirement age, along with the attendant changes (perhaps to disability policy) required to protect those unable to work longer. If it does, this book, in addition to being a pleasure to read, will make a very valuable contribution to the national retirement policy debate.

2004

Labor market changes are driving employers, employees, and policymakers to confront the need for a new retirement paradigm. The old model assumed a relatively homogeneous labor force where employee benefits, particularly pensions, were designed to reward career employees after years of loyalty, effort, and productivity. When labor force growth was the norm, many firms favored hiring plentiful younger workers over retaining more costly older employees. It was in that context that employers developed defined benefit (DB) plans that benefited mainly fullcareer employees, while penalizing those who remained with the firm only a few years. Now labor force aging, combined with slower rates of workforce growth, suggest that jobs and pensions will have to be structured rather differently. This chapter overviews the factors driving the new model. Disciplines Economics Comments The published version of this Working Paper may be found in the 2005 publication: Reinventing the Retirement Paradig...

The Geneva Papers on Risk and Insurance Issues and Practice, 2009

Since the 1950s, poverty among older Americans has become quite rare compared to the rest of the population. The retirement system has two main components: the social insurance system called Social Security provides the population age 65 or over with 39 per cent of their total income; occupational pension plans provide another 19 per cent of the older population's total income. Since 2000, Social Security pension levels have dropped for new retirees if they begin to get a pension before age 66. Coverage by occupational pension plans is on the wane. In future, these developments could lead to an income shortfall for those older Americans who do not save more or postpone retirement. The financial crisis has undermined confidence in savings as a reliable source of income. In recent years, there has been a slight increase in the labour force participation of the older population, including those over 65. Nonetheless, many Americans retire at 62, as soon as they can begin to draw a Social Security pension. If current policy concerning Social Security does not change, poverty could become more common than it is today among older Americans.

The Journal of Risk and Insurance, 1992