Work until you die — or until you can’t work anymore.

Until the late 19th century, that was the old-age plan for the bulk of the world’s workers.

Then came the Germans…

Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany’s Chancellor, Otto von Bismarck. The idea was first put forward, at Bismarck’s behest, in 1881 by Germany’s Emperor, William the First, in a ground-breaking letter to the German Parliament. William wrote: “. . . those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”

One persistent myth about the German program is that it adopted age 65 as the standard retirement age because that was Bismarck’s age. In fact, Germany initially set age 70 as the retirement age (and Bismarck himself was 74 at the time) and it was not until 27 years later (in 1916) that the age was lowered to 65. By that time, Bismarck had been dead for 18 years.

The idea of providing financial security for the aged gradually caught on and expanded in Europe, the United States and other advanced economies.

The Origins of the Retirement Age in Social Security

By the time America moved to social insurance in 1935 the German system was using age 65 as its retirement age. But this was not the major influence on the Committee on Economic Security (CES) when it proposed age 65 as the retirement age under Social Security.

This decision was not based on any philosophical principle or European precedent. It was, in fact, primarily pragmatic, and stemmed from two sources.

The Two Sources for Age 65

Source One: There was a general observation about prevailing retirement ages in the few private pension systems in existence at the time and, more importantly, the 30-state old-age pension systems then in operation. Roughly half of the state pension systems used age 65 as the retirement age and half used age 70.

Source Two: The new federal Railroad Retirement System passed by Congress earlier in 1934, also used age 65 as its retirement age. Taking all this into account, the CES planners made a rough judgment that age 65 was probably more reasonable than age 70.

This judgment was then confirmed by the actuarial studies. The studies showed that using age 65 produced a manageable system that could easily be made self-sustaining with only modest levels of payroll taxation.

So, these two factors, a kind of pragmatic judgment about prevailing retirement standards and the favorable actuarial outcome of using age 65, combined to be the real basis on which age 65 was chosen as the age for retirement under Social Security.

And that dear readers, is how we ended up with 65 as the de-facto age for retirement!