The leveling of the average retirement age suggests that earlier drivers of working longer are no longer having a substantial impact, according to a research report from the Center for Retirement Research at Boston College.
Alicia H. Munnell, director of the center, notes in the report that around the mid-1980s the labor force participation of men ages 55 to 64, and men 65 and older, started to gradually increase due to a number of factors:
- Social Security program changes made work more attractive relative to retirement. The liberalization, and for some the elimination, of the Social Security earnings test removed what many saw as an impediment to continued work. The delayed retirement credit, which increases benefits for each year that claiming is delayed between the Full Retirement Age and age 70, also improved incentives to keep working.
- The shift from defined benefit to defined contribution plans eliminated built-in incentives to retire. Studies show that workers covered by 401(k) plans retire a year or two later on average than similarly situated workers in a defined benefit plan.
- Life expectancy for men at 65 has increased about four years since 1980, and evidence suggests that people may be healthier as well, particularly those with higher socioeconomic status.
- People with more education work longer. Over the last 30 years, education levels have risen significantly, and the movement of large numbers of men up the educational ladder helps explain the increase in participation rates of older men.
- The shift away from manufacturing means that jobs now involve more knowledge-based activities, which put less strain on older bodies.
- More women are working. Wives, on average, are three years younger than their husbands, and husbands and wives like to coordinate their retirement. If wives wait to retire until age 62 to qualify for Social Security, that pattern would push their husbands’ retirement age toward 65.
- Combine the decline of employer-provided retiree health insurance with the rapid rise in health care costs, and workers have a strong incentive to keep working to maintain their employer’s health coverage until they qualify for Medicare at 65.
However, Munnell’s research finds that labor force participation of older people did not change much between 2003 and 2013. The average retirement age has increased only slightly in the last 10 years—to 64 for men and 62 for women.
Munnell notes that Social Security’s delayed retirement credit is fully phased in, and the shift from defined benefit to defined contribution plans is nearly complete in the private sector. She suggests that the delay in retirement due to the availability of Medicare has played its role, education is no longer increasing, improvements in health may have stabilized and rises in longevity may no longer be salient.
As working longer can help workers have a secure retirement, a major educational initiative may be warranted, Munnell says.
The issue brief, “The Average Retirement Age – An Update,” may be downloaded here.