Save and Conquer

I am fascinated by the history of retirement in the modern age. EH.net has an interesting article titled, “Economic History of Retirement in the United States,” by Joanna Short and Augustana College.

They point out that people have consistently been retiring at a younger age. In 1850, 76% of men age 65 or older were still working. In 1950, 47% of men age 65 or older were working. In 2000, only 17.5% were still working.

In the 1800’s, life was hard. Most people could not retire. They worked until they were not physically able. Then they counted on their children to take care of them for the short time before death. Short and College point out that through 1950, farmers and laborers were more likely to work much later in life.

The main explanation for the large increase in retired people through the 20th century was due to improving earnings and the ability to save. From the article

Over the period from 1890 to 1990, economic growth has led to nearly an eightfold increase in real gross domestic product (GDP) per capita. In 1890, GDP per capita was $3430 (in 1996 dollars), which is comparable to the levels of production in Morocco or Jamaica today. In 1990, real GDP per capita was $26,889. On average, Americans today enjoy a standard of living commensurate with eight times the income of Americans living a century ago. More income has made it possible to save for an extended retirement.

In summary, people have been retiring earlier because they could afford to. Much of this in the 20th century was due to an expanding workforce paying into Social Security. With the currently shrinking workforce, it will take more personal saving and investing to have a comfortable retirement at 65.

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