Thinking about when to retire and collect Social Security benefits is one of the most complicated decisions a worker can take. There are no good answers to the question of when, as life tends to throw curve balls at people when they least expect it, but the answer to the question seems to be increasingly “potentially never”.
Let us go back to when the retirement age was set, in 1935. It was the midst of the Great Depression, and the Social Security Act established a national retirement age of 65 as the standard. The average life expectancy at that time was just 58 for men and 62 for women, so it was understood that most people would not see retirement.
As labor economist Teresa Ghilarducci explains, “There was a lot of opposition to a national retirement plan. Setting the age at 65, when life expectancy was a lot lower than it is today, was a political decision to get the Social Security legislation through”.
But times have change, and now almost everyone makes it 65 and the system is not built for it. Nowadays people can collect benefits for decades. This is what caused the first collapse of the Social Security system in 1983, and one of the measures to combat future collapses was to incrementally raise the full retirement age to 67. The problem is, beneficiaries can still collect as early as 62, Medicare still kicks in at age 65 and Americans have ingrained the prior retirement age.
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All this to say, that in less than a decade, economists estimate there will be a universal 23% Social Security benefits cut as Social Security is approaching another funding crisis.
Solutions to the Social Security shortfall
One of the main solutions proposed it to raise the retirement age again, which the political right endorse. They believe it should match better life expectancy and should be pushed back. They are supported by business owners, like for example Blackrock CEO Larry Fink who stated that “no one should have to work longer than they want to,” but in the same breath called the idea of sexagenarian retirement “a bit crazy.”
The idea being that if we live longer, we should not take the extra years to enjoy life or to be sick and feeble, but to continue to work in whatever capacity we can.
Many studies seem to back up their policies, with the Pew Research Center finding in a December study that the number of working 65-plus-year-old Americans nearly doubled from 1987 to 2023 with higher levels of job satisfaction compared to younger workers. A catchy headline “The new retirement is no retirement: Baby boomers are keeping jobs well into their sixties and seventies because they ‘like going to work’” helps the cause.
Ghilarducci continues “There is lots of research that shows that people who are working in old age are healthier than people who are retired in old age. And in surveys of people who have chosen to keep on working, they have usually chosen it because they have a good match to their job.”
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But while this rosy picture seems wholesome, the reality is different. Most people that work past retirement age, especially those in blue collar jobs to so because they cannot afford to retire. Ghilarducci explains “This skewed idea that working longer makes [older adults] healthier is not relevant or true for 90% of the population. For almost everybody — the secretary, the health care worker, the retail clerk — research is finding retirement with enough income is better for their health.”
Delaying retirement can be challenging for many older adults, especially when financial circumstances would force them to continue working. A survey by MassMutual revealed that nearly half of retirees left the workforce earlier than anticipated. Among them, about one-third were forced to retire due to workplace changes. Additionally, a quarter cited illness or injury as the reason for early retirement.
Caregiving responsibilities, such as tending to a spouse with dementia or other health issues, also play a significant role in prompting unplanned retirements. These factors highlight the complex challenges older adults face in balancing work, health, and caregiving needs.
So, when to retire continues to be a complex issue and highly dependent on personal circumstances. While delaying retirement can be a good idea if at all possible, it is better to focus on improving your financial odds and taking care of your health.