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7 Reasons Why The Full Retirement Age is so High

Increasing Retirement Age

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It can be startling to find out that the full retirement age in the U.S is 67, based on the age one can collect Social Security benefits

Even more surprisingly, the average retirement age, in general, continues to go up as years go by. Why is the retirement age rising, and what does it mean?

Here are 7 reasons why the retirement age is so high:

  1. Better health and life expectancy.
  2. Rising retirement age helps older workers.
  3. High job satisfaction keeps people at work.
  4. People expect high standards of living.
  5. Higher retirement ages are cheaper for the company.
  6. Many people don’t know about retirement.
  7. Early retirement means you get less benefits.

In this article, I’ll be discussing why the retirement age is so high, including why it continues to rise and how it affects workers at large.

1. Better Health and Life Expectancy

The biggest reason why the retirement age is so high and why it continues to rise is that lifespans today are becoming longer than those in past decades. This is primarily due to better access to healthcare, which is improving rapidly due to various technological advances. 

Better access to information via the internet about staying healthy is also a factor.

According to the Social Security Administration, “Congress cited improvements in the health of older people and increases in average life expectancy as primary reasons for increasing the normal retirement age.” 

This was in support of the 1983 Amendment that increased the retirement age from 65 to 67, with an 11 year hiatus at which the age would be 66.

2. Rising Retirement Age Helps Older Workers

Simply put, employers don’t like to hire people who are too close to the retirement age. This is because they’d rather not put in the effort and training to hire someone who isn’t going to be working long-term, and who seems like they’re just looking for a job to hold them over until retirement. 

Fortunately, a higher retirement age means people who employers would have looked over 20 years ago for their age are receiving more chances at employment. 

Higher retirement age increases the value of older workers since they tend to have more experience than younger workers competing for the same positions, and retirement being put off makes them more worth training and keeping.

France, Belgium, and Italy have retirement ages of 60, and they have correspondingly lower rates of employment among people 50 and up. 

The social expectation that people of this age group will retire soon hamstrings their ability to get gainful employment, which has led other countries (U.S, UK, Japan) to raise their retirement ages. 

Unsurprisingly, this has led to lower unemployment in 50+ demographics in these countries.

3. High Job Satisfaction Keeps People at Work

According to this study, “increases in job satisfaction for mean and low household income workers are likely to make the prospect of retirement less attractive.” 

Put simply, people with lower incomes are less likely to retire if they’re happy or satisfied with their job. Lower-income people without significant retirement funds are less likely to take social security benefits before they reach the full age of retirement.

Interestingly, the same study at another point states that higher-income people are more capable of responding to low job satisfaction with earlier retirement - at the cost of some benefits. 

A higher-income retiree would most likely have 401k's and other streams of income that make retiring earlier and losing a portion of Social Security benefits less devastating.

A lesser but still important part of job satisfaction is that to many people, how much money they make at work is seen as a direct reflection of how much the employer, and ultimately society, values their work.

A janitor is more likely to retire early than an engineer, for example. 

According to CNBC, higher income people tend to value their jobs more highly and derive a higher amount of satisfaction from their work. 68% of people making $150,000 or more said they were ‘highly satisfied’ with their work, while a mere 40% of people making under $50,000 said the same.

4. People Expect High Standards of Living

‘Young old’ seniors are a significant portion of early retirees, those between 55-65. This is a crucial age for many because they want to enjoy their ‘golden years’ while they’re still in good health.

Common early retirement activities include:

  • Traveling
  • Recreational vehicles (RVs)
  • Starting a business
  • House or property remodeling

These are only a few activities people undertake when they retire, but a common theme is that none of them are cheap. 

As with most things, better health means more enjoyment and someone whose aspiration is to travel Asia in retirement may risk delaying retirement a couple of years if it means they would have more money to cover their expenses. 

As with all financial decisions, there are many other highly personal factors at play.

Related: Best Places to Retire in the World

5. Higher Retirement Ages Are Cheaper for the Company

A simple yet powerful reason that retirement ages are going up is that retiring later is cheaper. 

When Social Security was implemented in the 30s, standards of living made living to the full retirement age of 65 less likely than today. As morbid as it is to say, more people reaching the age of retirement costs more.

6. Many People Don’t Even Know About Retirement

A lot of misinformation is thrown around about retirement, not to mention that many people calculate poorly. A common myth about retirement is that withdrawing social security benefits early will lower your total benefits, which isn’t true, but could cause some people to resist retiring early. 

Another thing people don’t know about retirement is how much they need to maintain a comfortable standard of living. Many calculations are suggested, from a million dollars to 10-12 times your previous annual income.

 In the end, though, it all depends on how much per year you’re comfortable with living on.

7. Early Retirement Means You Get Less Benefits

Many people may not be aware, but you can take Social Security benefits before you’ve reached full retirement age. 

At the time of this writing, you can take SS benefits as early as age 62, but the full age of retirement is 67 for those born after 1960. Early retirement could mean stopping work at 62, but at the cost of not getting your full SS amount monthly. 

This decision is highly personal and depends on the person, what they want out of retirement, and more.

The math is a little complex, but the earlier you take benefits, the less you get. This page provides all the calculations necessary to figure out how much you would get if you withdrew early or decided to wait.

If you retire at 62 and begin taking partial benefits, this ultimately means that you will receive a lower amount of money for a longer period of time, which can affect quality of life. 

Contrary to popular belief, though, the total amount you’re paid from Social Security is the same whether you withdraw early or wait until full retirement age.

How drastically this long-term reduction in benefits affects retirees depends heavily on whether they possess other assets such as 401k's, index funds, or other investments.

Final Thoughts

Retirement is a complex subject with many moving parts, most hinging on people living longer as standards of living rise. 

The average age of retirement continues to rise due to a variety of factors. Rising life expectancies are the core factor along with high job satisfaction, early retirees maintaining high quality of life, and greater employability for older workers at large as a direct result.

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