Retirement

Retirement is the withdrawal from one's position or occupation or from one's active working life. A person may also semi-retire by reducing work hours or workload.
Many people choose to retire when they are elderly or incapable of doing their job for health reasons. People may also retire when they are eligible for private or public pension benefits, although some are forced to retire when bodily conditions no longer allow the person to work any longer or as a result of legislation concerning their positions. In most countries, the idea of retirement is of recent origin, being introduced during the late-nineteenth and early-twentieth centuries. Previously, low life expectancy, lack of social security and the absence of pension arrangements meant that most workers continued to work until their death. Germany was the first country to introduce retirement benefits in 1889.
Nowadays, most developed countries have systems to provide pensions on retirement in old age, funded by employers or the state. However, only about 15% of private industry workers in the US had access to a traditional defined benefit pension plan as of March 2023.These plans, often called pensions, are increasingly rare, especially in the private sector, as most companies now offer defined contribution plans like 401s instead. Public sector workers have much higher pension coverage, with about 75% participating in pension plans
In many poorer countries, there is no support for the elderly beyond that provided through the family. Today, retirement with a pension is considered a right of the worker in many societies; hard ideological, social, cultural and political battles have been fought over whether this is a right. In many Western countries, this is a right embodied in national constitutions.
An increasing number of individuals choose or are forced to put off this point of total retirement and exist in the emerging state of pre-tirement.

History

Retirement, or the practice of leaving one's job or ceasing to work after reaching a certain age, has been around since around the 18th century. Countries began to adopt government policies on retirement during the late 19th century and the 20th century, beginning in Germany under Otto von Bismarck.

Retirement age

A person may retire at whatever age they please. However, a country's tax laws or state old-age pension rules usually mean that in a given country a certain age is thought of as the standard retirement age. As life expectancy increases and more and more people live to an advanced age, in many countries the retirement age at which the public pension is awarded has been increased in the 21st century, often progressively.
The standard retirement age varies from country to country but it is generally between 50 and 70. In some countries this age is different for men and women, although this has recently been challenged in some countries, and in some countries the ages are being brought into line. The table below shows the variation in eligibility ages for public old-age benefits in the United States and many European countries, according to the OECD.
The retirement age in many countries is increasing, often starting in the 2010s and continuing until the late 2020s.

Country	Early retirement age	Normal retirement age	Employed, 55–59	Employed, 60–64	Employed, 65–69	Employed, 70+
Austria	60	65	39%	7%	1%	0%
Belgium	60	65	45%	12%	1%	0%
Cambodia	50	55	16%	1%	0%	0%
Denmark ¹	60–65	65–68	77%	35%	9%	3%
France ²	62	65	51%	12%	1%	0%
Germany	65	67	61%	23%	3%	0%
Greece	58	67	65%	18%	4%	0%
Italy	57	67	26%	12%	1%	0%
Latvia ³	none	63–65	?	?	?	?
Netherlands	60	65	53%	22%	3%	0%
Norway	62	67	74%	33%	7%	1%
Spain ⁴	60	65	46%	22%	0%	0%
Sweden	61	65	78%	58%	5%	1%
Switzerland	63,	65	77%	46%	7%	2%
Thailand	50	60	?	?	?	?
United Kingdom	65	68	69%	40%	10%	2%
United States ⁵	62	67	66%	43%	20%	5%
Kenya	50	55	66%	43%	20%	5%

Notes: Parentheses indicate eligibility age for women when different. Sources: Cols. 1–2: OECD Pensions at a Glance, Cols. 3–6: Tabulations from HRS, ELSA and SHARE. Square brackets indicate early retirement for some public employees.
¹ In Denmark, early retirement is called efterløn and there are some requirements to be met such as contributing to the labor market for at least 20 years. Early and normal retirement ages vary according to the date of birth of the person filing for retirement.
² In France, the retirement age was 60, with full pension entitlement at 65; in 2010 this was extended to 62 and 67 respectively, increasing progressively over the following eight years.
³ In Latvia, the retirement age depends on the date of birth of the person filing for retirement.
⁴ In Spain it was ruled that the retirement age was to increase from 65 to 67 progressively from 2013 to 2027.
⁵ In the United States, while the normal retirement age for Social Security, or Old Age Survivors Insurance was age 65 to receive unreduced benefits, it is gradually increasing to age 67 by 2027. Public servants are often not covered by Social Security but have their own pension programs. Police officers in the United States may typically retire at half pay after 20 years of service, or three-quarter pay after 30 years, allowing retirement from the early forties. Military members of the US Armed Forces may elect to retire after 20 years of active duty.
Iranian age of retirement was increased much in 2022 and 2023 to 42 years of work insurance payment record to avoid government social security bankruptcy.

Data sets

Recent advances in data collection have vastly improved the ability to understand important relationships between retirement and factors such as health, wealth, employment characteristics and family dynamics, among others. The most prominent study for examining retirement behavior in the United States is the ongoing Health and Retirement Study, first fielded in 1992. The HRS is a nationally representative longitudinal survey of adults in the U.S. ages 51+, conducted every two years, and contains a wealth of information on such topics as labor force participation, health, financial variables, family characteristics and a host of other topics.
2002 and 2004 saw the introductions of the English Longitudinal Study of Ageing and the Survey of Health, Ageing and Retirement in Europe, which includes respondents from 14 continental European countries plus Israel. These surveys were closely modeled after the HRS in the sample frame, design and content. A number of other countries also now field HRS-like surveys, and others are currently fielding pilot studies. These data sets have expanded the ability of researchers to examine questions about retirement behavior by adding a cross-national perspective.

Study	First wave	Eligibility age	Representative year/last wave	Sample size: households	Sample size: individuals

	1992	51+	2006	12,288	18,469
	2001	50+	2003	8,614	13,497
	2002	50+	2006	6,484	9,718
	2004	50+	2006	22,255	32,442
	2006	45+	2006	6,171	10,254
Japanese Health and Retirement Study	2007	45–75	2007		Est. 10,000
	2007	50+/18–49	2007	Est. 5,000/1,000
	pilot 2008	45+	2008	Est. 1,500	Est. 2,700
Longitudinal Aging Study in India	pilot 2009	45+	2009		Est. 2,000
	-	-	-	-	-

Notes: MHAS discontinued in 2003; ELSA numbers exclude institutionalized. Source: Borsch-Supan et al., eds.. Health, Ageing and Retirement in Europe : Starting the Longitudinal Dimension.

Factors affecting retirement decisions

Many factors affect people's retirement decisions. Retirement funding education is a big factor that affects the success of an individual's retirement experience. Social Security plays an important role because most individuals solely rely on Social Security as their only retirement option, when Social Security's trust funds are expected to be depleted by 2034. Knowledge affects an individual's retirement decisions by simply finding more reliable retirement options such as Individual Retirement Accounts or Employer-Sponsored Plans. In countries around the world, people are much more likely to retire at the early and normal retirement ages of the public pension system. This pattern cannot be explained by different financial incentives to retire at these ages since typically retirement benefits at these ages are approximately actuarially fair; that is, the present value of lifetime pension benefits conditional on retiring at age a is approximately the same as pension wealth conditional on retiring one year later at age a+1. Nevertheless, a large literature has found that individuals respond significantly to financial incentives relating to retirement.
Greater wealth tends to lead to earlier retirement since wealthier individuals can essentially "purchase" additional leisure. Generally, the effect of wealth on retirement is difficult to estimate empirically since observing greater wealth at older ages may be the result of increased saving over the working life in anticipation of earlier retirement. However, many economists have found creative ways to estimate wealth effects on retirement and typically find that they are small. For example, one paper exploits the receipt of an inheritance to measure the effect of wealth shocks on retirement using data from the HRS. The authors find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period.
A great deal of attention has surrounded how the 2008 financial crisis and subsequent Great Recession are affecting retirement decisions, with the conventional wisdom saying that fewer people will retire since their savings have been depleted; however recent research suggests that the opposite may happen. Using data from the HRS, researchers examined trends in defined benefit vs. defined contribution pension plans and found that those nearing retirement had only limited exposure to the recent stock market decline and thus are not likely to substantially delay their retirement. At the same time, using data from the Current Population Survey, another study estimates that mass layoffs are likely to lead to an increase in retirement almost 50% larger than the decrease brought about by the stock market crash, so that on net retirements are likely to increase in response to the crisis.
More information tells of how many who retire will continue to work, but not in the career they have had for the majority of their life. Job openings will increase in the next 5 years due to retirements of the baby boomer generation. The Over 50 population is actually the fastest growing labor groups in the US.
A great deal of research has examined the effects of health status and health shocks on retirement. It is widely found that individuals in poor health generally retire earlier than those in better health. This does not necessarily imply that poor health status leads people to retire earlier, since in surveys retirees may be more likely to exaggerate their poor health status to justify their earlier decision to retire. This justification bias, however, is likely to be small. In general, declining health over time, as well as the onset of new health conditions, have been found to be positively related to earlier retirement. Health conditions that can cause someone to retire include hypertension, diabetes mellitus, sleep apnea, joint diseases, and hyperlipidemia.
Most people are married when they reach retirement age; thus, spouse's employment status may affect one's decision to retire. On average, husbands are three years older than their wives in the U.S., and spouses often coordinate their retirement decisions. Thus, men are more likely to retire if their wives are also retired than if they are still in the labor force, and vice versa.