Retirement: How Did We Get Here?

With a blog entitled, Satisfying Retirement, it is rather obvious what my focus is. I have chosen to write about a subject I have been experiencing for over a dozen years. While not everyone is happy with the word retirement, we all understand what it means. At the same time there is serious debate  about its future, whether the whole concept of someone leaving the workforce at a set age remains valid in today's world.

For this post, I thought it would be interesting to look at how the whole idea of "retiring" started. If we could flash back about 80 years we wouldn't find anything like retirement. With a mostly rural society, folks worked on the farm until they couldn't anymore and then sat in a rocker while the younger family members took up the slack.

Those in factories or retail worked until their health gave out and they went home to a rather uncertain future. With no company pensions or government safety net, and little ability to save much during the working years, the "oldsters" were depending on being cared for by the rest of the family until death.

Things changed rather radically in 1935. The Social Security Act was signed into law in August of that year. Taxes were collected for the first time a little less than two years later and the first one-time, lump-sum payments were made in January, 1937. The maximum lump sum payments was $315, but the average was under $100. While not calling it that, these initial lump sum payments were meant for burial and funeral costs, not retirement. Regular ongoing monthly benefits started in January 1940. Note that such a massive social program took several years to be fully rolled out, not unlike the new health care laws.

While the new law didn't help older workers, suddenly younger workers had a guaranteed income  at a defined point in their future. That income was never designed to be someone's total income after work,  just a supplement. Unfortunately, as we all know, today too many of our fellow citizens are forced to live completely off Social Security. That leads to a rather sparse existence, but it is substantially better than the way things used to be.

Spousal benefits were not part of the original law. Retirement benefits were only paid to the primary worker. In 1939 the law was amended to add survivor, spousal, and children's benefits. In 1956 disability benefits became part of the program.

So, the concept of retirement that we all understand began in 1935. The urban legend that 65 was set as the full retirement age because most people died before then so the government was off the hook isn't true. My research shows 65 was picked because some European countries used that age so America just followed along.

Of course, as our life span has increased, the "full" retirement age for Social Security has crept up a few years, though not nearly enough to keep up with increased longevity. That is part of the reason for the constant talk of Social Security's fiscal future. And, it is important to remind ourselves that the original intent of Social Security wasn' t a retirement plan, just a supplement.

Importantly, as originally designed the government's role was simply that of the fund's administrator, rather than its payer. How things have changed over the past few generations! Congress has rather dramatically changed both the intent and funding of the program over the years, resulting in both a change in understanding of the role of Social Security and its funding.

But, back to the original point: retirement in any form and however paid for happened because our society changed. The rural model was replaced with an urban model. Families caring for family members until death was replaced with the idea that we were responsible for our own future well-being. Then, government decided that we may not be capable of taking care of ourselves on our own and turned Social Security into a retirement program instead of just a supplemental program.

As poet Robert Frost wrote in his "The Road Not Taken, "and that has made all the difference."

Lesson over...class dismissed.