The average retirement age is higher than traditional measures suggest, according to a new Economic Policy Institute briefing paper. “The myth of early retirement” explains why existing measures of average retirement age are misleading and suggests a new, more accurate measure.
Over the past 25 years, people have begun retiring later and later. According to the paper’s author, economist Monique Morrissey, the share of 55- to 64-year-olds currently in the labor force is the highest on record, and the share of workers who are 55 or older is now the same as it was 50 years ago.
“Existing measures of the average retirement age are problematic because they either include people still working for pay or because they count people who are not in the workforce to begin with, such as disabled people and full-time caregivers. A better measure calculates the average retirement age as occurring when the labor force participation rate of the non-disabled workforce is at half its peak. Using this measure, the average retirement age is currently 65.5,” the report found.
This increase in retirement age stems from Social Security benefit cuts enacted in 1983 and the shift to 401(k) plans over pensions in the past 25 years, the report stated.
There are three ways to measure when people are retiring: those based on Social Security take-up; those based on surveys asking people if they consider themselves retired; and those based on the labor force participation rate of older workers. The problem with using Social Security take-up as a gauge is that many people who begin taking benefits are still in the workforce collecting a paycheck, the report said. Measures based on labor force participation lump retirees in with others who are not in the labor force, such as disabled people and full-time caregivers.
On average, people begin to take payments from Social Security at about age 64.
A more logical estimate of the average retirement age is the age at which half of the workforce has left the labor force, the report said. “A better estimate of the average retirement age is the age at which half of the nondisabled workforce has exited the labor force: 65.5,” the paper said. That figure still understates the number of people who voluntarily retired, since it includes workers who dropped out of the labor force after losing their jobs. It does count anyone who works at all as not retired.