Retirement Essay

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Retirement is an economic-based term that traditionally refers to the ending of paid work, often signaling the end of one’s professional or work career. In the United States, retirement is usually accompanied by the receipt of Social Security to provide income, Medicare to cover some health care costs, and private retirement accounts or pensions to supplement savings.

One basic aspect of the retirement process is the question of a retirement age. Two concepts must be the mandatory retirement age and “full” or “normal” retirement age. Issues of a mandatory retirement age center around changes in the Age Discrimination in Employment Act (ADEA). In 1967, passage of the ADEA addressed age-related issues in the workplace by preventing hiring and firing practices based on age. In 1978, the focus of the act expanded with an amendment to the ADEA preventing companies from enforcing mandatory retirement upon employees before they reached 70 years of age. More recently, in 1986, an amendment to the act prohibited companies from setting a mandatory retirement requirement based on age.

Due in part to ADEA legislation, the United States currently has no mandatory retirement age. However, the Social Security Administration (SSA) does set an age for entitlement to full Social Security benefits. The SSA uses the term normal retirement age or full retirement age to describe the age at which a person can receive full retirement benefits. Retirement before such age incurs a penalty and deductions, while retirement after such age offers increased benefits. According to the SSA, as of 2006, the normal or full retirement age is 65 years of age for those born in the year 1937 or earlier. For those born after 1937, the normal or full retirement age increases by monthly increments. For those born in 1960 and later, the retirement age reaches 67 years.

Early Versus Phased Retirement

According to the U.S. Census Bureau, before the 1990s, the trend was toward early retirement; that is, people retiring before eligibility for full benefits. Now the trend has shifted toward phased retirement— simply reducing hours of work gradually and easing into the retirement role. According to the Employment Benefit Research Institute’s (EBRI) 2006 Retirement Confidence Survey, although current employees favor more retirement options, such as phased retirement, companies are only beginning to offer phased retirement plans.

Although phased retirement may be preferred, obstacles such as laws and regulations prevented widespread access to phased retirement options. Early versions of the Employee Retirement Income Security Act (ERISA) prevented taking monies from one’s pension while working. Also, if a retiree was working at a part-time job, Social Security benefits were reduced. In 2000, passage of the Senior Citizen Freedom to Work Act addressed these obstacles. It relaxed restrictions for collecting pension monies while working in retirement. Under the Senior Citizen Freedom to Work Act, individuals can work in retirement without a deduction taken from their Social Security benefits. In addition to phased retirement, the combination of all factors (pensions, laws, acts) is leading to what is now called “late retirement,” where individuals retire well past age 67 and sometimes in their 70s and 80s. Also common are “bridge jobs”—those jobs that help one transition from a lifelong career into retirement.

Baby Boomers as They Retire

Issues of ways to retire have come to the forefront because a large segment of the U.S. population is reaching retirement age: the baby boomers, those born post-World War II during the years 1946 to 1964. According to the U.S. Census Bureau, the first wave will reach 62 in 2008 and will reach 65 in 2011. In fact, the Census Bureau estimates that in 2020, individuals ages 60 to 64 will be double the number of those at that age in 2000. The number of those 65 and over in 2030 will be twice that of 2000, increasing in size from 35 million to 75 million. This sheer number of potential retirees has made lawmakers, companies, and individuals rethink the way they previously viewed retirement. The retirement of the baby boomer group is often cited as a drain or loss of a large percentage of the skilled and experienced labor force.

Retirement Uncertainties

Two trends are leading to uncertainties in retirement. The first is the sheer number of people or segment of the population reaching retirement age. The second is the trend toward increased life expectancy. The volume of retirees has led to questions about the ability of federal programs, such as Social Security, to sustain the current aging population financially. Those considering retirement are concerned that Medicare will not cover all their health care costs.

Second, as life expectancy increases and individuals live longer, many individuals feel they cannot retire and then afford to maintain their current lifestyles for an additional 20 or more years based on income gathered from Social Security, pensions, and savings. Retirees are often unsure of the terms of their employer-based pension accounts even when the terms have been explained to them. To cover these self-estimated costs, 70 to 80 percent of persons expect to work during their retirement, according to surveys of current workers.

Individual Views on Retirement

Literature tends to rate individuals’ views on retirement initially as positive, hopeful, and favorable, despite the previously mentioned uncertainties. Some theorists have long held that retirement (the end of the “Second Age”) gives way to a period of increased renewal and personal growth (the “Third Age”) in which personal achievement and development are possible. Activity theory, which suggests that retirement is a time when increased formal and informal social interaction can provide enhanced enjoyment because of the adoption of new and fulfilling social roles, can also apply to this period of the life course.

Qualitative studies reveal that attitudes toward retirement change after the individual retires. Many first see retirement as positive (when new or proposed), but due to postretirement changes, the positive attitude declines and some individuals experience an identity crisis due to the role change. In fact, some studies show that retirement is one of life’s top 10 stressors. In other words, the initial positive views toward one’s retirement are offset by the accompanying role change, isolation, and stress the retiree experiences.

Notably, most empirical studies mention this generally hopeful and optimistic view of retirement is strongly affected by the individual’s social class, gender, race, and marital, occupational, and health statuses. The inequalities experienced over the life course carry over to the retirement period as well. Those of higher social class (with higher levels of education, income, and occupational prestige) carry additional income sources and higher social status over to their postretirement identity. Women, especially those in the early baby boomer cohorts, may not have worked outside the home because of the gender norms of the time and tend to be widowed—causing them to have less retirement security than their male counterparts. In terms of race, inequalities in pay for African Americans and Hispanics translate into less certain financial retirement outcomes. As for health status, poor health causes individuals to retire earlier with fewer benefits; those in better health report greater satisfaction during their retirement years.

Demographic changes, laws, private industry’s retirement and pension plans, along with descriptive characteristics of the individual, provide insight into the variety of factors shaping the retirement experience.

Bibliography:

  1. Clark, Robert and Olivia Mitchell, eds. 2005. Reinventing the Retirement Paradigm. New York: Oxford University Press.
  2. Employee Benefit Research Institute. 2006. “Will More of Us Be Working Forever? The 2006 Retirement Confidence Survey.” Employee Benefit Research Institute Issue Brief292:1-28.
  3. Equal Employment Opportunity Commission. 2006. “Age Discrimination in Employment Act.” Washington, DC: Equal Employment Opportunity Commission. Retrieved March 29, 2017 (https://www.eeoc.gov/laws/types/age.cfm).
  4. Holmes, Thomas and Richard Rahe. 1967. “The Social Readjustment Rating Scale.” Journal of Psychosomatic Research 11(2):213-18.
  5. Hudson, Robert, ed. 2005. The New Politics of Old Age Policy. Baltimore: Johns Hopkins University Press.
  6. Laslett, Peter. 1991. A Fresh Map of Life: The Emergence of the Third Age. Cambridge, MA: Harvard University Press.
  7. Social Security Administration. 2006. “Social Security Benefits: Normal Retirement Age.” Washington, DC: Social Security Administration. Retrieved March 29, 2017 (https://www.ssa.gov/oact/progdata/nra.html).
  8. S. Bureau of the Census. 2005. Current Population Reports, Special Studies: 65+ in the United States. Washington, DC: U.S. Government Printing Office.
  9. S. Department of Labor. 2008. “Employee Retirement Income Security Act (ERISA).” Washington, DC: Department of Labor. Retrieved March 29, 2017 (https://www.dol.gov/general/topic/retirement/erisa).
  10. Vincent, John A., Chris R. Phillipson, and Murna Downs, eds. 2006. The Futures of Old Age. Thousand Oaks, CA: Sage.
  11. Weiss, Robert. 2005. The Experience of Retirement. Ithaca, NY: Cornell University Press.

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