Retirement 

The concept of retirement emerged in the late 19th and early 20th centuries, as industrialization and urbanization transformed the economy and society. As factories replaced farms, older workers faced increasing competition from younger and more skilled immigrants. As cities grew, older workers faced higher costs of living and less social support. As life expectancy increased, older workers faced more health problems and disabilities. These factors created a surplus of older workers who were seen as less productive by employers and policymakers. 

To address this problem, some employers and labor unions began to offer pensions and retirement plans to their workers, as a way of encouraging them to leave the workforce voluntarily and make room for younger workers. This was especially important during the Great Depression when unemployment was very high and following the end of World War II when returning veterans needed work. The first private pension plan in the US was established by the American Express Company, followed by other companies such as Standard Oil, AT&T, and US Steel. Many states and local governments also established their own pension plans. However, these plans were often limited, inconsistent, and unreliable, covering only a small fraction of the workforce and providing meager benefits. 

The Great Depression of the 1930s exposed the inadequacy of the existing pension system and the plight of the elderly poor. Millions of older workers lost their jobs, savings, and pensions, and had no means of support. In response, President Franklin D. Roosevelt proposed the Social Security Act of 1935, which created a national system of old-age insurance, funded by payroll taxes from workers and employers. The act also established other programs, such as unemployment insurance, disability insurance, and aid to dependent children. The Social Security Act was landmark legislation that marked the beginning of the welfare state in the US and the identification of the government’s role in the well-being of its citizens. 

The Social Security Act initially provided modest benefits to workers who retired at age 65 or older, based on their earnings and contributions. However, over the years, the program expanded, increasing the benefits, lowering the retirement age, and extending the coverage to spouses, dependents, and survivors. The Social Security program also faced several challenges and reforms, such as financing shortfalls, demographic changes, and political debates. Despite its limitations and controversies, the Social Security program remains a popular social program in the US for retirees and disabled Americans. 

The Social Security program, along with other factors, such as economic growth, rising wages, private pensions, health insurance, and labor unions, enabled more and more Americans to retire from work and enjoy a leisurely lifestyle. Retirement became a norm and an expectation for the majority of the workforce, especially after World War II. Retirement also became a culture and an industry, as retirees sought new ways of spending their time, money, and energy. Retirees moved to warmer climates, such as Florida and Arizona, forming retirement communities and resorts. Retirees engaged in various hobbies, activities, and travels, creating a market for retirement products and services. Retirees also participated in various social and political causes, forming organizations and movements, such as the American Association of Retired Persons (AARP). 

The retirement culture, however, also faced some challenges and criticisms, such as boredom, isolation, dependency, and ageism. Some retirees felt dissatisfied and unfulfilled with their retirement, missing the sense of purpose and identity that work provided. Some retirees faced financial and health difficulties, especially in the wake of the 2008 recession and the COVID-19 pandemic. Some challenged the conventional notion of retirement, opting for alternative forms of work, education, and volunteering. Retirement, therefore, is not a uniform or static experience, but a diverse and dynamic one, shaped by individual and social factors. It’s also still a fairly recent phenomenon, having become a normal part of American life just two to three generations ago.  

Retirement in the US has undergone significant changes and developments over the past century. Retirement evolved from a rare and privileged status to a common and expected phase of life for millions of Americans, thanks to various economic, social, and political factors. While Social Security or pensions alone may have provided enough income for an individual decades ago, the growing appetite for material goods, plus the costly increases of inflation, have made it more important for Americans to save their own nest egg for retirement. If you’re looking for an independent financial planner to help you with your retirement goals, click here.