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How did the world settle for a retirement age of 65? After all, we can thank German railroads.
But before that, note that the concept is nothing new, as people have been surprised by the recent talk of raising the retirement age to 70.
In fact, 70 was the intended retirement age for major European governments when they first devised the concept of pensions more than 100 years ago.
As Charles Ellis explains in his new book,understand it— Full of interesting insights into investment history and strategy — German Chancellor Otto von Bismarck set the first retirement age of 70 in the 1880s.
This decision was a practical one. At that time, a series of large-scale train accidents caused an uproar in Germany. It turns out that the operator fell asleep on the switch, leading to the accident.
These workers were predominantly older men who were no longer able to carry out the heavy lifting associated with railroad work. By default it ended up being an operator job. As Ellis writes, “Older workers who sat alone for hours in the warm sun would occasionally doze off.”
Bismarck lured workers into the railroad with the promise of lifetime employment, so he could not simply fire the older workers. Instead, he decided to give these operators a dignified exit and invented the pension system as we know it today.
But then, and still is, concerns quickly arose over how to fund such an expensive project. Bismarck’s solution was to start paying workers when they reached his 70th birthday.
A few years later, in 1916, the German government decided that lowering the retirement age to 65 would be a better way to eliminate ‘old age’ related accidents.
On the other hand, in England, Chancellor of the Exchequer Neville Chamberlain later became Prime Minister, Soothed Adolf Hitler — also had a retirement age of 70.
Across the relatively young Whippersnapper Pond in the country known as the United States, Congress has set the retirement age for railroad workers in the country at 65. Since then, age 65 has become synonymous with retirement.
Of course, life expectancy has increased significantly since then. In addition, birth rates have begun to plummet in many countries, leaving 65, or even younger, as a retirement age etched into the national psyche.
Rising retirees, fueled by a declining working-age population, is not a recipe for sustaining retirement programs such as Social Security.
How best to deal with this troubling reality is the subject of intense debate. But she now understands why 65 has become the unofficial “retirement age,” and why the government’s efforts to bring that number down to her 70 isn’t surprising.
Looking to take control of your retirement? Check out 5 Easy Ways to Invest Your Retirement Savings.