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March 04, 2015 at 11:01 AM
A report released in March by the Center for Retirement Research at Boston College studied labor force participation rates for men and women, which have been increasing steadily for several decades, to find the average retirement age. However, social and structural changes that worked together to increase participation rates may have less of an effect going forward.
For men, the average retirement age in 2013, which the report defined as the age at which the labor force participation rate drops below 50, was around 64. For women, it was around 62.
The new report is an update to a 2011 report by the Center, which found that for both men and women the average retirement age increased only two years to its current level over a 20-year period.
The report noted that prior to the mid-1980s, there was a long-term drop in work force participation among men that began around 1880. Alicia Munnell, director of the Center for Retirement Research and author of the report, attributed that decline to “unexpected and substantial stream of income from old-age pensions for Civil War veterans.”
Another big decline started after World War II, when Social Security benefits and employer pensions made retirement more attractive. Munnell attributed the “final leg of the decline” to the introduction of Medicare in 1965 and an increase in Social Security benefits in 1972.
In the mid-1980s, men 55 and older started participating more in the work force. Munnell gave several reasons for the continued turnaround affecting both men and women.
Changes to Social Security had a big impact. In 2000, the retirement earnings test was abolished for people ages 65 to 69. Increasing benefits for delaying retirement also made work more appealing.
Workers in a 401(k) plan tend to work one or two years later than those in a defined benefit plan, according to Munnell. As 401(k)s became more common than pensions, more workers were staying in the work force.
As jobs shifted away from the manufacturing sector and became less physically demanding, workers were able to stay in the labor force for longer. Better health and longevity in general made it easier to keep working, too. Munnell noted that the “correlation between health and labor force activity is very strong.”
Additionally, employers were less likely to provide health insurance for retirees, offering a strong incentive to work at least until they qualify for Medicare.
