How Has Retirement Changed Through the Years?

Retirement has changed drastically in the past hundred years, and people have trouble keeping up with the changing landscape. Let’s take a look at retirement across the years and how people's thoughts about those sunset years have also changed.

Photo by Anukrati Omar on Unsplash


Once upon a time, retirement was barely a thought in people’s minds. People worked until they couldn’t anymore, and family would have to take care of them. After all, if they didn’t work, then the farms wouldn’t produce the food they needed to survive.

However, starting in the 1800s, the US government started to offer pensions to some of its municipal employees. Soon, the private sector started to offer pensions as well, motivated in part because an aging workforce had difficulty keeping up during the Industrial Revolution.

For the vast majority of Americans, however, pensions were unavailable, and irrelevant. The average life expectancy in 1900 was 46 years, so they could not take part in any pensions that would begin at age 60.


In the middle of the Great Depression, some began to propose that because workers would slow down as they got older, they needed to be moved out of the workforce. The best way to incentivize this was a scheme to pay older employees a retirement pension to stop working.

Roosevelt signed the Social Security Act of 1935. This act created a pension plan that ordinary citizens could pay into to prepare for retirement.

Social Security is special in many ways. Unlike most private pensions, Social Security is adjusted for inflation. This monumental act is still an integral part of most people’s retirement plans today.

At the time, Social Security, combined with pensions, savings, and family care, helped form the pillars of people’s retirement.


During this time, with people experiencing longer life expectancy, pensions grew more and more expensive for employers. Not only that, but when inflation spiked, most retirees didn’t have enough income to cope with rising expenses. Pensions were struggling under these pressures, and something needed to happen.

At this time, Congress passed an act called the Revenue Act of 1978. In a single paragraph – Section 401k – the law allowed for employees to avoid taxes on deferred compensation. In other words, if employees agreed to put a portion of their income aside for retirement, the government would not tax those dollars.

Using this one paragraph, savvy accountants were able to create plans for employers to incentivize their employee’s retirement savings. Not only were these plans much cheaper than pensions, but they also allowed employees more control over how their retirement would be invested. This created savings for employers, and potential inflation protection for their employees.

However, 401ks also increase the level of risk employees’ retirement funds are exposed to. There is no longer the guarantee of income. To make the best use of it, employees must be savvy in their investment choices.

This, combined with mismanagement of 401ks in the early 2000s, has made many fearful of taking part in these plans.


People are living longer than ever. When the idea of retirement was first floated, most people didn’t even reach 65 years. But now, we’re living longer than ever before. Many who want to retire at age 65 have to plan for 30 years of income. That’s like a second lifetime that must be planned for.

With people growing older, Social Security continues to run into problems. Right now, unless something is done, the Social Security Trust is due to run out of money by 2035.

Many people who live on fixed income through pensions also continue to run into problems as they cannot cope with rising inflation.

And with a third of Americans having less than $1000 in their bank accounts, they cannot rely on their savings to cover their expenses.

So, what can be done?

There are many tools available for people who want to plan for retirement. And in that sentence lies the most important idea: a plan. Most people don’t have a true plan for retirement. In fact, many assume they can never retire – that they’ll have to continue to work for the rest of their lives.

Suddenly, this dream of living out our final days in peace seems out of reach for so many.

But a good plan can help you make use of the tools available to you, in your circumstances, to reach your goals.

If you’re concerned about your prospects for retirement and want help forming a plan, click here to sign up for a free Bronze Account. A licensed financial advisor will reach out to meet with you and help you create a customized plan for your situation.

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