Why America’s Average Retirement Age Keeps Rising: Exploring the Factors and Future Trends

In recent years, Americans have been retiring later in life.

According to a recent report by prominent economist Alicia Munnell, the average retirement age in the United States has been steadily rising.

This shift has sparked important questions: Why is this happening, and when will it stop? In this article, we’ll explore the underlying factors driving the trend and assess what it means for the future of retirement in the United States.

A Rising Trend: The Changing Retirement Age

The average retirement age in the U.S. has steadily increased over the past few decades.

In 1994, the typical American man retired at age 61, while women retired at 59.

Fast forward to 2024, and the numbers have shifted: men are retiring at 64, while women retire at 62.

Over the past 30 years, the average retirement age has increased by roughly three years, a notable shift that continues to unfold.

Alicia Munnell’s April 2024 research brief sheds light on these figures, which raise the question: Will the trend of longer working lives continue, or has it reached its peak?

Why Are Americans Working Longer?

There are several key factors driving this upward shift in retirement age. Some of the most significant include:

1. Longevity and Health Improvements: Americans are living longer and staying healthier than ever before. As a result, many feel they can continue working for longer periods, especially in less physically demanding jobs.

2. Pension System Changes: The shift from traditional workplace pensions to 401(k) plans has had a significant impact on retirement planning. With 401(k) plans, workers are incentivized to delay retirement in order to maximize their benefits.

3. Social Security Adjustments: The full retirement age for Social Security has increased from 65 to 67. Those who choose to claim benefits earlier face reduced monthly payments. This adjustment has led many to continue working in order to receive a higher payout later.

4. Health Insurance Considerations: Fewer employers offer health insurance to workers who retire before 65, the age when Medicare benefits typically begin. As a result, many Americans choose to work longer to maintain health coverage.

These factors, among others, contribute to a trend that shows no immediate signs of slowing.

The Debate: Is the Rise in Retirement Age a Necessity or a Choice?

While some experts view the increase in retirement age as a sign of economic resilience, others worry that it’s a sign of financial insecurity.

Andrew Biggs, a senior fellow at the American Enterprise Institute, suggests that the rise in retirement age may not necessarily be a negative trend.

He argues that higher Social Security benefits, as well as increased participation in private retirement plans, have helped many Americans build sufficient savings for retirement.

As a result, many retirees don’t need to work longer to avoid poverty.

However, the situation is not universal. A 2024 survey by AARP found that one in five adults over 50 have no retirement savings at all.

For many of these individuals, continuing to work is less of a choice and more of a necessity.

According to Nicola Bianchi, assistant professor of strategy at Northwestern University, “Postponing retirement is likely a necessity to keep their main income stream going” for a significant number of workers.

Mixed Emotions Toward Retirement

Americans have a complex relationship with retirement.

On one hand, millions dream of retiring early, hoping to enjoy their golden years without the constraints of a daily job.

But for many, as retirement age approaches, those dreams give way to the reality of needing or wanting to continue working.

According to the Transamerica Center for Retirement Studies, the average worker over the age of 50 expects to retire at 67.

This reflects the growing trend of extended working lives, as more people find themselves financially unprepared to retire earlier.

In reality, however, many workers end up retiring earlier than planned due to unforeseen circumstances, such as health issues or company downsizing.

Despite these challenges, there is a significant portion of the workforce that envisions working longer, whether by choice or necessity.

Will the Trend Continue?

Munnell’s research suggests that the rising retirement age may not continue indefinitely.

While several factors have contributed to longer working lives in recent decades, Munnell argues that the upward trend has likely peaked.

In her analysis, Munnell points out that the gradual increase in Social Security’s full retirement age has been completed, and no further changes are planned.

The transition from pensions to 401(k) plans has largely been completed, with half of American workers now participating in 401(k) plans.

Furthermore, the trend of longer and healthier lives has slowed, suggesting that the forces encouraging longer working lives may have reached their limits.

The Key Retirement Ages: 62 and 65

In the calculus of American retirement, two ages stand out: 62 and 65.

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• 🧓Age 62: At 62, most Americans qualify for Social Security benefits. However, those who start claiming at this age receive lower payments compared to those who wait until they are older. Despite this, 62 continues to be the most common age for Americans to begin receiving Social Security.

• 🧓Age 65: Age 65 is significant because it’s when Americans become eligible for Medicare, which provides health coverage for retirees. As many retirees delay their retirement to ensure they have adequate health coverage, age 65 is a key factor in determining when people choose to retire.

Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute (EBRI), notes that these two ages will continue to play a significant role in the retirement decision-making process.

“Unless those ages are moved,” he says, “I don’t see the average retirement age moving much.”

Will the Retirement Age Decrease in 2025?

While the general trend has been toward later retirement, there is a possibility that the average retirement age may actually decline in 2025.

Munnell and other experts attribute a recent surge in Social Security claims to widespread fears about the stability of the Social Security Trust Fund.

The Trump administration’s cost-cutting measures, including staff cuts and changes to Social Security rules, have sparked an increase in claims, with new claims up by more than 15% in March 2024 compared to the previous year.

Many individuals are rushing to claim their benefits earlier than they had planned, leading to the possibility of earlier retirements for some workers.

The Role of Future Policy Changes

Future changes in policy could have a significant impact on the retirement age in America.

For example, Republican lawmakers have periodically proposed raising the full retirement age for Social Security, although President Trump has pledged not to make any changes to it.

If the eligibility age for full Social Security benefits were to rise from 67 to 70, the average retirement age would likely continue to increase.

Similarly, if Congress were to raise the age of eligibility for Medicare, retirement ages could rise even more dramatically.

However, given the high costs of health insurance, experts believe that such changes are unlikely.

Conclusion: A Complex and Evolving Retirement Landscape

In conclusion, the rising retirement age in the United States is a complex issue shaped by multiple factors, including longer life expectancy, changes to pension systems, and evolving Social Security policies.

While many Americans are working longer by choice, others are doing so out of financial necessity.

As the future of retirement continues to unfold, one thing remains clear: the average retirement age will be shaped by a combination of personal decisions, economic trends, and policy changes.

For now, it seems that while the trend toward later retirement may have peaked, it will still take time to fully understand its long-term implications for American workers and retirees.