History Pensions

Americans did not retire during the eighteenth and nineteenth centuries; they merely reduced their responsibilities on the farm or with the family business as they aged. As the country became industrialized and pensions were established, the age at which a worker left the work force and began drawing retirement benefits became an issue.

Before Social Security was established, pensions had a variety of eligibility requirements, often containing an age sixty-five retirement age provision. The B&O Railroad plan, for example, provided for retirement at sixty-five after ten years of service, but workers could collect a disability pension at age sixty. Often, plans had maximum retirement ages of seventy, and this was the standard in the railroad industry. The U.S. Steel pension plan had one of the youngest retirement ages—workers had to be sixty to collect benefits.

The Committee on Economic Security, while considering what features should be in a U.S. social insurance system, looked at historical precedent for establishing the normal retirement age at sixty-five. The Committee looked to Germany's social insurance system; the precedent set by the Civil War pension board in 1890; the 1910 Massachusetts Commission on Old Age Pensions definition; the post office letter-carriers retirement eligibility; and railroad pension eligibility; all of which had age sixty-five standards for the payment of benefits.

Once the age sixty-five eligibility for normal retirement benefits in Social Security was set, many private pension plans also adopted it as the retirement standard. In 1961, when Social Security was amended to provide that men could collect early retirement with reduced benefits at age sixty-two, private plans were influenced by this change as well. Pensions often contain provisions that provide for early retirement benefits to begin at age sixty-two and many allow retirement at age fifty-five with a minimum number of years on the job.

The Age Discrimination in Employment Act of 1967 (ADEA) originally allowed employers to set a mandatory retirement age of seventy. A 1986 amendment to the ADEA now prohibits the establishment of a mandatory retirement age in retirement plans, with some exceptions.

Amendments to the Social Security Act in 1983 included a provision to increase the age for unreduced retirement benefits to sixty-seven. This increase will be gradual, beginning with those who were born in 1938, reaching age sixty-seven for individuals born in 1960 or later.