Why '65' Isn't the Magic Number for Retirement Anymore
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For nearly 100 years, Americans have been told that they're supposed to follow a particular script: Turn 65. Retire. Move to a sunny state. Play golf. Hang out with grandkids. Begin the long slide down. Perhaps you don’t play golf, but you get the point. Today, that familiar script is being torn up by millions of people who have realized that, having made it to 65, there's a good chance that they might live to be 90 or older. The proverbial golf game is not sustainable for 25 years. They're ready for new challenges.
Time for a new script.
Plenty of Americans have already started writing their own. A growing number of people age 65 age or older are postponing retirement. And plenty of others are launching second careers, starting new businesses, going back to school, or training for their first marathon. Some are even starting new families and yes, others may be taking up skiing and even golf for the first time. Reaching 65 no longer signals the beginning of the end—more like a new beginning.
But how did 65 become the magic number for retirement in America in the first place?
It all started to take shape in 1935 when President Roosevelt signed the Social Security Act, setting up a lifetime pension to the then 7.8 million Americans over the age of 65. It was a practical solution designed to counter the economic effects of the depression and to also encourage aging Americans to leave the workforce and make room for younger people. At the time, 65 seemed like a more than reasonable age at which to encourage retiring. The life expectancy in 1935 was 59.9 for men and 63.9 for women. What wasn’t factored in was that by 2022 the average life expectancy in the U.S. would grow by 20 years. Today, 58 million Americans are 65 or older and that number grows by 10,000 a day.
Roosevelt’s move set up a government-instituted, formalized view that you were old at 65 and pretty much done with work, and even life. Over the years, the business world canonized the concept. And images in entertainment and advertising embellished the idea, piling on promises that everyone deserved to shuffle off to a life of leisure and fun after slogging it out in the workplace, raising kids, and sacrificing.
Perhaps there was no better example than the creation in 1960 of Sun City—the Phoenix-area development that many consider to be the first retirement community. Del Webb, the developer behind Sun City, coined the phrase “the golden years.” And his community promised residents a life of pure post-retirement bliss.
This cultural moment meshed perfectly with the Federal government’s repeated embrace of 65 as an endpoint. In 1965, President Lyndon Johnson signed Medicare into law, the government sponsored health insurance that kicked in at 65. That provided another goal for retirees to hit knowing that they could step out of work and have good healthcare for life. By the Sixties, nearly half of the private sector workforce also had a traditional pension, adding another layer of economic security. Americans were all wired up to believe that 65 was the finish line. It became a part of our national psyche: Get to 65 and check out.
The system worked smoothly—until it didn’t.
A looming economic crisis
With extended lifespans there is a looming economic crisis facing the U.S. with regards to the ability to continue to fund the social net programs that were established to guarantee the lifetime financial and medical support for all Americans. The latest forecast from the Congressional Budget Office projects that the costs of Social Security and Medicare will grow faster than tax revenues over the next decade.
The debate over how to address that challenge took center stage in Washington during President Biden's State of the Union address in early February. Biden referenced a "Rescue America" plan floated last year by Rick Scott, the Republican senator from Florida, to sunset all federal programs, including potentially Social Security and Medicare. “So tonight, let’s all agree—and we apparently are — let’s stand up for seniors,” said Biden. “Stand up and show them we will not cut Social Security. We will not cut Medicare.” Senate minority leader Mitch McConnell slammed Scott's sunsetting proposal as not a "Republican plan." Then, days later, Scott proposed the "Protect Our Seniors Act," a bill that would increase funding for Social Security and Medicare.
The political theater and partisan bickering about the best way to address the budget implications of these programs will continue. The solutions aren't easy. But breaking free from the entrenched societal expectations for people in their late 60s and 70s is a thorny issue, too, because the concept of retiring at 65 is so deeply ingrained.
Who is "old" anyway?
In fact, we have to go back even a bit further than the creation of Social Security to understand the origins of the 65-and-out mindset. While some experts debate it, many historians and economists point to Otto von Bismarck, the chancellor of the German empire, who in 1881 proposed the idea of a social program that would promise lifetime economic security for older citizens. His plan was actually pegged to age 70. In those days only a small percentage of the population would actually reach that milestone, so the payout didn't quite match the grandiosity of the promise.
Nonetheless, the program became the template for most Western countries—providing for an aging population by building a government-sponsored approach to incentivize people to leave the workforce at 65. Prior to those efforts, people worked until they couldn’t anymore—especially since life expectancies in the early twentieth century were below 50 years old. Basically, you worked until you died.
Bradley Schurman, author of the book The Super Age: Decoding our Demographic Destiny, points out that the 65 phenomenon actually goes back even further in history. According to him, in ancient Rome and well into the Renaissance, 65 was commonly mentioned as the time when people were released from many public service activities like jury duty and military service, as well as being absolved from certain religious ceremonies such as fasting during Lent. In those days, 65 was very old. In the U.S. today, by contrast, many studies indicate that people believe that they are just coming out of middle age at 65, and that one isn’t actually old until the late-70s or later.
Yet, the definition of "old" remains up for grabs. As explored in a Washington Post article a few years ago—"An ageless question: When is someone 'old'?"— there are many characteristics that need to be taken into consideration to make that determination. It depends on someone’s cognitive abilities, disability, health history, and even education levels, explains Sergei Scherbov from the International Institute for Applied Systems Analysis, a group that studies aging. Add into the mix exercise, diet, and what country you live in, and you can find 50-year-olds who present as old and others who don’t fit the definition until they're in their 80s.
Dr. Laura Carstensen, who runs the Stanford Center on Longevity, says, “In everyday parlance, old typically means worn out. We refer to old cars, old coats, and old people. So there is a tendency for people to refer to older people who are vibrant as 'young.' I prefer Gloria Steinem’s riposte. 'This is what 80 looks like.'”
Many would argue that what 65 once represented is stuck in an old paradigm and that we are in the midst of a major shift—affecting government and business policies, as well as a reframing of people’s lives. Like most social movements that bring about change, the people are way ahead of the cultural status quo.
It's already starting to play out in the workplace. According to a Bureau of Labor Statistics Study, 69% of Baby Boomers are already working past 65. In the various reports that Boomers are retiring, what is being missed is that many are actually” rewiring” into other activities. A Tennessee Consolidated Retirement System study showed that 60% of people of traditional retirement age said that it was a time to just shift to a different line of work. Some because they wanted to and others because they needed to.
Jack Kliger had a long and successful career in the Publishing business, but at seventy-two he became the president and CEO of the Museum of Jewish Heritage in New York City. As the son of survivors of the Budapest and Polish ghettos, he said that it is the most meaningful job he has had in his life.
Keith Kelly was a well-known and sometimes feared columnist who covered the media scene for 40 years, including the last 23 at the New York Post. He stepped down at 67 and within days was sailing with a friend on a 32-foot sailboat to Virginia. As his dream of buying his local Manhattan neighborhood newspaper faded, he was approached by Straus Media to be the editor in chief of four other local newspapers in New York City. “My wife’s first question was do they have an office that you can go to?” he said. They do. And Kelly finds himself putting in a 40-plus hour week again.
“It’s a new twist on my old job as a columnist, but it’s exciting and invigorating. The past was a blast, but going forward I’m going to be judged on how well I do as a local editor,” he adds.
Internships for senior citizens
By 2030, one in five people will be 65 and older. Like the examples above, many have chosen to ignore the concept of retirement. Dr. Anthony Fauci at 81 stated that he would leave government service after five decades to “pursue the next chapter of my career.” Examples abound everywhere.
Today, 57% of all small business owners are over 50 and the Kansas City-based Ewing Marion Kaufmann Foundation reports that 25 percent of all entrepreneurs are 55 to 64 years old, setting themselves up for a long run tapping into their experience, knowledge, and contacts.
Many believe that we need a new cultural infrastructure and set of policies to accommodate the idea that living longer means the need for more engagement and purpose for individuals.
Marc Freedman, founder and co-CEO of CoGenerate, a nonprofit that focuses on bridging generational divides to co-create the future believes that we need to rethink how individuals think about life after their main careers. His organization sponsors Encore Fellowships, which he calls a “gap year for adults.” The goal is to take what someone has learned and give them new skills to move into the social impact space. Known as the second act for greater good, the program has brought in more than 2,000 fellows who have gone through what Freedman calls the real world version of Robert De Niro's experience in the movie The Intern.
He also explained that when someone is transitioning out of work at 65, the process is fraught with anxiety and uncertainty about the future. That unease gets compounded when you think that you might have another 25 or more years to live.
Freedman believes that government, the private sector, and organizations need a collaborative fix to create a new roadmap for people. One idea he has is to let individuals take an early year of social security and use that to go back to school to re-skill, then work another year afterwards (without social security). This could give people an added boost to move from what he calls "freedom from work to freedom to work."
Many people 65 and older are deciding to continue to work because of drive and passion, but a lot of them need to work for economic stability, especially if they live to 90 or older. This new mindset will benefit them in the long run, as there are dark clouds on the horizon with regards to government support in the future.
According to the Social Security Administration there are 66 million people on social security at a cost of over $1 trillion. With 58 million people 65 or older in 2022, mushrooming to 76 million by 2035, it doesn’t take a math wizard to figure out the challenges ahead.
Around 61 million Americans are covered by Medicare Health Benefits and according to Statista, those costs are $917 billion in 2022 growing to $1.78 trillion by 2031, a daunting number.
Social Security and Medicare alone account for 46% of the federal budget today. The question is can it support the huge 65-plus population that is anticipated in the U.S. over the next decade and beyond?
Add to that the Social Security Trust and Medicare Health Insurance Trust Fund reserves are expected to be depleted within the next 10 years, unless Congress takes action to prevent what many say will be catastrophic results for Americans who rely on these payments to live on.
Safety net programs have always been a hot political issue between Democrats and Republicans, but now it has become cinder-hot. Some politicians have called to privatize these efforts or have a review every so many years to determine things like eligibility and payouts.
A new voting bloc
By taking away or reducing any of these benefits will have enormous impact for politicians who want to keep their jobs. The voting bloc of older citizens is only going to continue to grow and make their voices heard.
The Social Security Administration reports that at least half of the income of 50 percent of elderly married couples rely on social security as a main source of income. One study showed that federal taxes from those over 50 will quadruple between 2018 and 2050. Those taxes go into the U.S. Treasury that pays the salaries of Congress.
Washington D.C. based nonprofit Alliance for Lifetime Income has been working to educate and raise awareness about these looming conflicts for everyone. Their message is “do not rely on Social Security for your entire retirement income." Social security was created to be a safety-net and only covers about 30% of your pre-retirement income, leaving a huge gap in the income you’re guaranteed to receive in what could be 20, 30, or more years in retirement.
Jason Fichtner, a Senior Fellow in the Alliance’s Retirement Income Institute and former Deputy Commissioner of Social Security underscores the importance of this effort. “My guess is that Congress does nothing to address this for 10 years, when the Trust is depleted," he says. "Then it will force Government to borrow more money to support the system. Yet individuals could still face a 20 percent or more reduction in their benefits.”
His colleague Jae Oh, an Education Fellow with the Institute, adds that on top of the financial issues, the Medicare system needs significant reform as the delivery system services function on an a la carte basis. There are so many stakeholders from primary care physicians, hospitals, pharmaceutical companies and more that the complexities are daunting.
Fichter and Oh would argue that it is in the hands of the entity that created all of this in the first place: the federal government.
“There is no meaningful legislative action on this front. Politicians are kicking the can down the road—not a good scenario for our future," says Fichter.
Ultimately, smart voters are going to see how this will affect them and demand some type of reform. If not, the alternative will be things like raising the Formal Retirement Age (FRA) in order to get full benefits, reducing payouts, increasing healthcare costs, and raising payroll taxes. Higher income individuals may need to be paid less or get taxed 100% on their payments vs. 85% today. Expect a lot of outcry as the changes happen.
All of this has serious consequences for an aging population, but also for those who are 40 or younger. If no one on the Hill as the guts to ring the alarm for meaningful reform, Social Security as we know it today won’t exist or at best be a shell of itself.
The trailblazers who are working past 65 today will be the role models demonstrating the need for everyone to continue to work longer than earlier generations just to maintain income to live on. We need to start educating young people that if they cannot rely on Social Security in any meaningful way, and with pensions all but gone, their financial well-being is in their own hands. Like health and fitness, it is another life metric that they need to focus on as part of their lifelong efforts.
Let’s start by unpacking that 65 is some magic number. Employers need to understand and respect that older employees will have to work longer. They'll need to encourage a culture of savings for future financial well-being with 401(k) plans and education as well as to rid themselves of systemic ageist policies. Government needs a major rethink on how people will be supported through the existing programs. Where are our enlightened leaders? It’s all coming at us very fast.
We don't have any more time to waste.
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