Retirement Was Always Supposed to Start at Age 70: Here’s Why That Changed

How did the world settle on a retirement age of 65? As it turns out, you can thank the German railroad.

But before you do, note that as people turn aghast over recent talk of bumping the retirement age up to 70, that concept is nothing new.

In fact, key governments in Europe intended 70 to be the retirement age all along when they first invented the concept of pensions more than century ago.

As Charles Ellis explains in his new book “Figuring It Out” — which is packed with interesting insights about investing history and strategy — German Chancellor Otto von Bismarck established the first known retirement age at 70 back in the 1880s.

The decision was a pragmatic one. At the time, a series of major train wrecks in Germany had people in an uproar. It turned out that operators were falling asleep at the switches, leading to the accidents.

These workers were overwhelmingly older men who no longer could perform the hard manual labor associated with railroad work. By default, they ended up with the operator jobs. And as Ellis writes, “sitting alone for hours in the warm sun, the old workers sometimes dozed off.”

Bismarck had lured workers to the railroad by promising jobs for life, so he couldn’t simply fire older employees. Instead, he decided to provide a dignified exit for these operators, inventing the pension system we know today.

However, then — as now — worries quickly arose about how to fund such an expensive project. Bismarck’s solution was to start the payments to workers when they reached age 70. At the time, these newly minted retirees weren’t expected to live very long, given life expectancies of the era.

Years later — in 1916 — the German government decided that lowering the retirement age to 65 was an even better way to ensure the end of accidents tied to “old age.”

Meanwhile, in England, Chancellor of the Exchequer Neville Chamberlain — who would later become prime minister and go on to infamy as the leader who appeased Adolph Hitler — had also established a retirement age of 70. But he lowered the age to 65 when he saw what Germany had done.

Across the pond in that relatively young whippersnapper of a nation known as the United States, Congress set 65 as the retirement age for its own railroad workers. And 65 has been synonymous with retirement ever since.

Of course, life expectancies have increased significantly since then. In addition, birth rates have started to plummet in many nations where 65 — or even younger — remains the retirement age that is carved into the national psyche.

A growing number of retirees supported by a dwindling number of working-age folks is not a recipe for sustaining retirement programs such as Social Security.

How best to address that thorny reality is a topic of fierce debate. But now you know why 65 has become the unofficial “retirement age” and why government efforts to push that number to 70 should come as no surprise.

Looking to take control of your own retirement? Check out “5 Simple Ways to Invest Your Retirement Savings.”