Private Pensions Promote Earlier Retirements

July 19, 2001 ( The median retirement age in the US is falling perhaps encouraged by increasingly generous early retirement provisions in private sector defined benefit plans, according to an Employee Benefits Research Institute (EBRI) analysis of BLS data.

In fact, in 1999 nearly three-fourths (72.1%) of all retired workers receiving social security had their benefits reduced because of early retirement.

According to the US Bureau of Labor Statistics (BLS)

  • between 1950-1955, the median age of retirement was 66.9 for men and 67.7 for women.
  • between 1990-1995, it had fallen to 62.7 for men and 62.6 for women, and
  • it is projected in to be 61.7 for men and 61.2 for women during 2000?2005

Shrinking Benefits

According to data from the Social Security Administration (SSA), in 1999, the benefits of 72.1% of all retired workers receiving social security were reduced because of early retirement, and this proportion has steadily increased over time,

  • from 2.2% in 1950
  • to 11.8% in 1960,
  • 45.4% in 1970,
  • 62.2% in 1980, and
  • 68.4% in 1990.

Changes to Social Security benefit payments in 1969, 1971 and 1972 increased the average real benefit payment by 46.2% from 1970 to 1980, while the 1977 Amendments to Social Security, which changed the system’s benefit formula, made the penalty for retiring at age 62 less severe –

possibly contributing to the decline in labor force participation rates of males ages 55?64.

Designing Minds

The numbers of those retiring early have also been spurred by pension plan design. Data from the BLS shows that between 1963 and in 1983 the percentage of workers covered by plans that permitted retirement with full benefits at age 60 or earlier rose by 39%.

Further over the same period, the proportion of total pension plan participants in plans that allowed retirement with reduced benefits before eligibility for full benefits increased from 75% to 97%.

According to data from a survey sponsored by the SSA in1982, about 50% of the males who retired in the 1970s did so with a defined benefit (DB) plan.


But the trend towards earlier retirement seen in the last 50 years is not likely to continue, given the move away from defined benefit plans towards defined contribution plans. The number of DB plans is falling steadily. In 1975, there were 103,346 private-sector DB plans, peaking at 175,143 in 1983 and then falling steadily to 59,499 in 1997.

And the percentage of the work force covered by a private-sector DB plan has declined steadily since 1975, when 43.7% of workers in the private sector were covered by a DB plan. By 1997 this had fallen to 22.3%.