With People Living and Working Longer than Ever, Experts Say “65” Isn’t the Magic Number for Retirement Anymore
When many of us were growing up, it seemed there was something absolute about the age of 65. Simply put, that’s when people were expected to retire – period. Some companies even made 65 the mandatory retirement age. These days, however, a growing chorus of voices are asking the question, “Why?” What’s magic about 65?
It turns out, according to this in-depth article from Esquire, that 65 is no longer the retirement milestone it once was – yet it’s not clear that society has gotten the Aand we had to skim several of his points, but it’s an insightful read. Let’s dig in.
“Turn 65, Retire, Play Golf” – Not Anymore
“For nearly 100 years,” Clinton begins, “Americans have been told that they’re supposed to follow a particular script: Turn 65. Retire. Move to a sunny state. Play golf. Hang out with grandkids. Begin the long slide down. Perhaps you don’t play golf, but you get the point.”
However, he adds, those expectations are changing forever. “Today, that familiar script is being torn up by millions of people who have realized that, having made it to 65, there’s a good chance that they might live to be 90 or older. The proverbial golf game is not sustainable for 25 years. They’re ready for new challenges.” Clinton’s verdict: “Time for a new script.”
The article says that this re-scripting has already started. “A growing number of people age 65 age or older are postponing retirement. And plenty of others are launching second careers, starting new businesses, going back to school, or training for their first marathon. Some are even starting new families and yes, others may be taking up skiing and even golf for the first time. Reaching 65 no longer signals the beginning of the end—more like a new beginning.”
Why 65? The Answer Goes Back Nine Decades
“How did 65 become the magic number for retirement in America in the first place?” asks Clinton. As with many such conventions, government policy played a part.
“It all started to take shape in 1935 when President Roosevelt signed the Social Security Act, setting up a lifetime pension to the then 7.8 million Americans over the age of 65. It was a practical solution designed to counter the economic effects of the depression and to also encourage aging Americans to leave the workforce and make room for younger people,” says Clinton. Because life expectancy in 1935 was barely 60 for men and 64 for women, 65 seemed a reasonable age at the time.
But the important consequence was that Roosevelt’s new program “set up a government-instituted, formalized view that you were old at 65 and pretty much done with work, and even life. Over the years, the business world canonized the concept. And images in entertainment and advertising embellished the idea, piling on promises that everyone deserved to shuffle off to a life of leisure and fun after slogging it out in the workplace, raising kids, and sacrificing.”
Marketers quickly started targeting seniors with brand new living options like Sun City, started in 1960 by entrepreneur Del Webb who, says Esquire, coined the phrase “the golden years.” Later, when President Lyndon Johnson signed Medicare into law in 1965, the age of 65 was once again enshrined as the age for government-sponsored health insurance. “That provided another goal for retirees to hit knowing that they could step out of work and have good healthcare for life,” says the article. “It became a part of our national psyche: Get to 65 and check out.”
Longer Lifespans Trigger a Looming Economic Crisis
“The system worked smoothly,” Clinton writes – “until it didn’t.” As he explains, “What wasn’t factored in was that by 2022 the average life expectancy in the U.S. would grow by 20 years. Today, 58 million Americans are 65 or older and that number grows by 10,000 a day.” Thanks to the fact that we’re living far longer, there is “a looming economic crisis facing the U.S. with regards to the ability to continue to fund the social net programs that were established to guarantee the lifetime financial and medical support for all Americans.”
We’ve written extensively here on the Blog about the need for bipartisan action to solve the funding crisis for Social Security and Medicare. Sadly, bipartisanship is in short supply, especially with programs that are so extensive and costly. “The political theater and partisan bickering about the best way to address the budget implications of these programs will continue,” says Clinton.
Who is Really “Old” These Days?
In fact, as Clinton writes, the idea that 65 was the right age to retire predates FDR by centuries. The Esquire article details how public life as far back as ancient Rome put special emphasis on reaching 65, as have many societies since. As we noted, we lack the space to dive into the topic here, but the discussion gives the history of our fixation on 65. It also does raise the deeper question, “Who exactly is old?”
“The definition of ‘old’ remains up for grabs,” says Clinton. “It depends on someone’s cognitive abilities, disability, health history, and even education levels,” one expert wrote. “Add into the mix exercise, diet, and what country you live in, and you can find 50-year-olds who present as old and others who don’t fit the definition until they’re in their 80s.”
But the problem, as Dr. Laura Carstensen of the Stanford Center on Longevity told Clinton, is one of perception. “In everyday parlance, old typically means worn out. We refer to old cars, old coats, and old people. So there is a tendency for people to refer to older people who are vibrant as ‘young.’ I prefer Gloria Steinem’s riposte. ‘This is what 80 looks like.’”
The Old Paradigm is Disappearing
Clinton argues that the major shift away from 65 as retirement age is well underway. “It’s already starting to play out in the workplace,” he writes. “According to a Bureau of Labor Statistics Study, 69 percent of Baby Boomers are already working past 65. In the various reports that Boomers are retiring, what is being missed is that many are actually ‘rewiring’ into other activities.” Some are doing this because they want to and others because they need to.
Demographics play a major role in this shift. “By 2030,” says Clinton, “one in five people will be 65 and older,” and “many have chosen to ignore the concept of retirement.” Surveys show that a majority of small business owners are over 50, and that 25 percent of all entrepreneurs are 55 to 64 years old. As a result of these trends, Clinton writes, “Many believe that we need a new cultural infrastructure and set of policies to accommodate the idea that living longer means the need for more engagement and purpose for individuals.”
Clinton spoke with Marc Freedman, founder and co-CEO of CoGenerate, a nonprofit that focuses on bridging generational divides to co-create the future. “Freedman believes that government, the private sector, and organizations need a collaborative fix to create a new roadmap for people,” Clinton writes. “One idea he has is to let individuals take an early year of social security and use that to go back to school to re-skill, then work another year afterwards (without social security).” Freedman calls this moving from “freedom from work to freedom to work.”
Passion to Work vs. Need to Work
Clinton freely acknowledges that many senior workers are motivated chiefly by financial needs. “Many people 65 and older are deciding to continue to work because of drive and passion,” he writes, “but a lot of them need to work for economic stability, especially if they live to 90 or older. This new mindset will benefit them in the long run, as there are dark clouds on the horizon with regards to government support in the future.”
Clinton cites sobering stats from the Social Security Administration: currently 66 million people are drawing benefits, at a cost of over $1 trillion. “With 58 million people 65 or older in 2022, mushrooming to 76 million by 2035, it doesn’t take a math wizard to figure out the challenges ahead,” he warns. Medicare is in similar straits: the cost to cover 61 million Americans today is $917 billion – a bill that will soar by 2031 $1.78 trillion.
“Social Security and Medicare alone account for 46 percent of the federal budget today,” says Clinton. “The question is can it support the huge 65-plus population that is anticipated in the U.S. over the next decade and beyond?” The very real fear that the Social Security Trust and Medicare Health Insurance Trust Fund reserves could be depleted within a decade – unless Congress takes action – and that could trigger benefit cuts that Clinton calls “catastrophic.”
The Growing Clout of Older Voters
The one thing that might propel lawmakers to take action is the increasing power of seniors at the ballot box. “The voting bloc of older citizens is only going to continue to grow and make their voices heard,” says Clinton. A large percentage rely on Social Security for the majority of their retirement income – something that was never intended when the program began. “Social security was created to be a safety-net and only covers about 30 percent of your pre-retirement income,” says Esquire, “leaving a huge gap in the income you’re guaranteed to receive in what could be 20, 30, or more years in retirement.”
Yet many are putting too many “retirement eggs” in the Social Security basket. According to this recent article from MSN, “About one in four workers have said they plan to rely upon Social Security as their primary source of retirement income, according to a recent Transamerica survey. But that could be more problematic than many realize.” Future retirees need to be especially realistic.
“You don’t have to plan for a retirement without Social Security, because even in the worst-case scenario, the program will still be able to provide you with some money,” says MSN. “But it’s best not to be too optimistic about how much you’ll receive.”
“Ultimately,” says Clinton, “smart voters are going to see how this will affect them and demand some type of reform. If not, the alternative will be things like raising the Formal Retirement Age (FRA) in order to get full benefits, reducing payouts, increasing healthcare costs, and raising payroll taxes. Higher income individuals may need to be paid less or get taxed 100 percent on their payments vs. 85 percent today. Expect a lot of outcry as the changes happen.”
Consequences Affect Workers of All Ages
Clinton ends his Esquire analysis with a clear call that issues like the health of Social Security and Medicare don’t just apply to seniors. “All of this has serious consequences for an aging population, but also for those who are 40 or younger,” he warns. “If no one on the Hill has the guts to ring the alarm for meaningful reform, Social Security as we know it today won’t exist or at best be a shell of itself.”
He salutes those he calls “the trailblazers who are working past 65 today,” calling them “the role models demonstrating the need for everyone to continue to work longer than earlier generations just to maintain income to live on.” Indeed, he states, “We need to start educating young people that if they cannot rely on Social Security in any meaningful way, and with pensions all but gone, their financial well-being is in their own hands. Like health and fitness, it is another life metric that they need to focus on as part of their lifelong efforts.”
Clinton ends his article where he began. “Let’s start by unpacking that 65 is some magic number,” he urges. “Employers need to understand and respect that older employees will have to work longer. They’ll need to encourage a culture of savings for future financial well-being with 401(k) plans and education as well as to rid themselves of systemic ageist policies. Government needs a major rethink on how people will be supported through the existing programs. Where are our enlightened leaders? It’s all coming at us very fast. We don’t have any more time to waste.”
(originally reported at www.esquire.com)