Retirement Problems


It is really interesting to see how various "litanies" present in the social sciences are repeated over and over again, year after year, without major variations, and after every repetition there are no substantial changes in our societies and public policies. I've noticed that after reading Clark Tibbits' article "Retirement Problems in American Society" that appeared in 1954 in the American Journal of Sociology. As I was reading the article I was thinking that the list of problems and some ideas how to solve them that are present in Tibbits' article could appear in a social sciences journal in the year 1980, 1990 as well as in 2009 (except for the written form that wouldn't satisfy today's journals criteria, in my humble opinion). It seems that retirement problems are still more or less the same, and still unresolved, even though 55 years is a really long period.

In this paper I will show that some problems that were present 55 years ago are still present in the scientific literature in the various decades between 1954 and 2009.

Tibbits[1] (1954) tried to expose some major problems of retirement age, and retirement in general in the USA. Right away in the abstract he gave a definition of retirement, which is "essentially a product of scientific invention and discovery, resulting in changing social roles and in the extension of life beyond the completion of conventional adult responsibilities" (Tibbits, 1954:301). According to him, there are three different ways the term is used in the literature up to 1954:

* generally is understood to mean separation or withdrawal from one's principal career occupation in gainful employment

* complete or final separation from the workforce

* the end of all contributory activity beyond that of mere self-maintenance

Tibbits says that even these three categories don't satisfy all the variations. For example, the self-employed persons even in 1954 tended to not retire abruptly but they would rather reduce the time or effort devoted to their jobs.

According to Tibbits there are two requirements that are needed to roughly define retirement, and these are:

1) persons who report themselves as no longer in the regular work force and

2) unemployed women whose children have matured and left home (in other words, this requirement is meant for housewives).

What is the right time to retire from work was even in 1954 "a critical and complex problem" as it is still today. In the 1930s was introduced the principle that retirement should occur somewhere between 60 and 70 years of age, but the individual, says Tibbits, takes in consideration these variables when she thinks about retirement:

* financial condition

* energy and health

* performance capacity

* need to maintain position or status in the family and community

* the wish for stimulating activity

* the ability to retain or find a work

* the desire for time to devote to other interests

30 years later similar conditions were important to decide whether to retire earlier or later of the fixed age for retirement. In their 1984 article "Economic Determinants of the Optimal Retirement Age: An Empirical Investigation" Fields and Mitchell (1984) found out that people with higher base wealth retire earlier, and those who expect to gain more by postponing retirement retire later. They say that there are at least three reasons why is it so (Fields, Mitchell 1984:249):

* because of the ordinary income effect, wealthier people would buy more leisure

* [...] because of diminishing marginal utility income, wealthier people would value extra income less than would poorer people

* in a household production context, wealthier people are apt to own more goods to complement their retirement years and, hence, have higher marginal utility of leisure than would less wealthy people.

Then, in 1998, Mitchell and Moore (394) conclude that Americans cannot really afford to retire because:

1) The median American on the verge of retirement has accumulated too little wealth to support a comfortabl retirement

2) Most American have little other retirement wealth under their control besides company pension plans

3) To achieve widely agreed-on retirement accumulation targets, the typical United States older household would have to set aside an additional twenty percent of income between now and age sixty-two to achieve a replacement rate consistent with that retirement planners have recommended

4) People are moving into retirement with ever-smaller components of their wealth in bequeathable, non-annuitized, form (394-295).

Stock and Wise conclude almost the same as above by stating that "a person continues to work if the expected value of retirement in the future is worth more than the value of retiring now" (1990:1176).

According to Tibbits, there is a lot of evidence that says that most aging and even aged persons wish to continue in gainful employment. "The majority of salaried workers and wage-earners resist retirement as long as their health continues good, and many keep even longer" (Tibbits 1954:303). On the other hand, says Tibbits, the decisive factors for retirement for the employer are 1) the supply of qualified workers, 2) their cost and productive capacity, 3) the need to advance younger workers[2], 4) and the hiring and retiring practices and pensions.

Various unexpected economic and political changes can also influence a person to change her retirement age plans. Anderson et al. (1986) found out that "retirement dreams" in more than 40% of the cases[3] don't come true. They say that part of the difference between planned and actual retirement age was due to major changes in the Social Security system during the late 1960s and early 1970s in the USA that resulted in substantial increases in th value of Social Security wealth, which induced retirement earlier than planned (this finding fits perfectly Fields and Mitchells findings). But, the reversal of macroeconomic trend of the 1960s, that led a dramatic deterioration of economic conditions after the period retirement plans had been made, "tended to delay retirement beyond the planned date, suggesting that seniority provisions and age discrimination laws may have protected older workers from pressures to retire" (525).

Also in the 1950s, as we see in Tibbits (1954), there was a fear, as is present today, of the cost of supporting an increasing retired population. At that time older people contributed from $10 to $12 billion[4] to the national product. There were arguments too that said that economy is not really endangered by the population aging and retirement. According to Tibbits (1954:304), "in the USA the over-all ratio of persons who are not gainful workers per 100 gainful workers declined from 209 in 1870 to 135 in 1952. Aged non workers persons increased from 2% to 10% of all non-gainful workers in the 1870 to 1952 period. That ratio shouldn't change during the next generation."

Tibbits based his conclusions not only on the statistics above, but on a forecast that said that the rise in manufacturing production by the year 2000 will be twice as large as the increase in population, and on another group's prediction (not cited) that the national income in 1975 will be twice what it is today and that the per capita increase will approximate 65%[5]. So, it seemed to him that the standard of living of the USA is not threatened by the growing number of retired persons. Money for the military defense, as Tibbits writes, could be a major problem in predictions, though.

Tibbits thinks, as we'll see later in this paper, that it's a pity to "dismiss" older people since they have a lot of experience and knowledge, and, during the World War II the employment of older people was essential for the USA. He cites the National Comitee of Aging[6] by saying that "[T]here is a growing recognition of the current waste of skills and experience and of the individual problems and frustrations brought by retirement at a fixed age." (Tibbits, 1954:303).

To arrest the long-time downward trend in the employment of older men the following adjustments are required according to Tibbits: 1) current prejudices have to be abandoned; 2) research will be necessary on the development of objective criteria for hiring and retirement; 3) the length of the work week may have to be reduced; 4) more opportunities for tapering off and part-time work may have to be developed, as well as 5) procedures for moving older workers into positions of lesser responsibility, and 6) there must be provision for counseling, rehabilitation, and retraining. In other words, Tibbits even then was aware that "the society must provide a climate in which older adults may continue as socially integrated, contributing, self-sufficient individuals" (Tibbits 1954:).

Numerous studies of the time showed[7] that the principal problems faced by the older individual are 1) maintenance of income to meet the requirements of active and healthful living; 2) discovery of new occupations or social roles; 3) finding opportunity for social contacts, companionship and affection; 4) maintenance of health; 5) procurement of suitable living arrangements. These problems may bring major frustrations to the elderly, and, moreover, from the 1950 census resulted that older people, as we can imagine, made a little money for a living, and as a consequence they were poorly housed, ate badly, neglected health, and withdraw from organizational and community activities. Many became burdens to their children who had to support families on their own and save for their retirements at the same time.

The private pension system in the USA of the 1950s seemed to tend to place the worker at a disadvantage when he sought to change jobs, when he wished to continue beyond a fixed retirement age, or when unemployed he applied for work (Tibbits 1954:305). The activity alternative (see above) promises growth, preservation of the vital functions, purposeful living, continued social usefulness, and self-sufficiency.

Tibbits asks: "In retirement can a way of life be developed in which the individual has purpose, comparative independence from children, and incentive to maintain health and self-sufficiency, society becoming the beneficiary of the product of his energy and maturity?" (Tibbits 1954:306). Giarini and Liedtke answered to that question in their report to the Club of Rome "The Employment Dilemma and the Future of Work" (Giarini, Liedtke, 2006)[8]. They think a good solution for the elderly and for the retirement problems is part-time jobs for that category (Giarini, Liedtke 2006:125-126). They say it is just a prejudice that older workers are a burden to to the employers. Older workers "are experienced, reliable, work hard, are effective in their job, think before they act and display good team-working abilities" (Giarini, Liedtke 2006:125). Moreover, "[t]hey are also subject to lower turnover and seem to be more flexible towards new assignments and changing work conditions as their younger colleagues" (ibid.).According to Giarini and Liedtke, as we have seen, the problem is not in working capacities of the elderly, but in the fact that the employer must pay more for older workers because the contribution to pension systems increase with age, so their younger colleagues must pay for them. Such a problem could be solved by a performance-based remuneration as it is more and more used in the Anglo-Saxon countries. It would be even better to switch to part-time jobs at the end of the working life, and to continue with part-time jobs, if capable, even after the fixed retirement age. It would be a gradual retirement, and it seems that some experiences are mainly positive[9]. Giarini and Liedtke say the organizational problems that could arise in the beginning can be "compensated through reductions in absenteeism, increased flexibility, improved morale and productivity growth" (2006:126). It is happening right now with older female workers from the former Yugoslavia (mostly Slovenia and Croatia) that go to work in Italy as house helpers (the so-called "badanti") after retirement to make an extra income for their families[10]. Unfortunately, a great number of them work without the proper papers.

Older members of our societies, according to Tibbits, must be activated in three activities in order to not deteriorate their lives and life conditions. Those three activities should be in these fields: 1) community service, 2) continuing education[11], 3) and citizenship. A lot of older persons find satisfaction and new lives in thoughtfully developed, organized, community-sponsored situations, and sometimes can even earn some extra income. They can also work with the organizations such as the Red Cross and other NGOs, or "form groups of retired businessmen for the purpose of offering consultation services to individuals or small organizations for little or no fee" (Tibbits 1954:306). Other possibilities for senior citizens based on citizenship are to be consultants in various fields, members of survey teams, of commissions and advisory groups, as councils of elders, or, merely, as thinking, informed members of the community.

Tibbits says, citing George A. Lundberg, that "[t]he fundamental problem is that of shifting from a technological society focused on ever increasing productivity of goods and wealth to one in which the highest values are placed on forms of consumption that yield the greatest degrees of personal satisfaction and social gain."

Another major problem is to find replacements for earlier sources of social contacts, companionship, and affection. The death of friends further constricts the social sphere.

Declining health is generally a predisposing factor in retirement rather than a consequence. There is evidence of premature deterioration when retirement deprives the organism and the mind of activity[12]. Also low retirement incomes and lack of information often impede proper nutrition, medical care, and rehabilitation services. health improves when retired persons rediscover a purpose in life.

Another Tibbits' observation, among all others, was right, after the departure of children there is a reduced need for housing space, and because of that new situation there is a new opportunity to migrate to a more attractive par of the USA. That's exactly what happens today in the USA when the elderly go to Florida or California, or in Europe older persons move to Spain or France. His insight is even more interesting because in that period was believed that older people are unwilling to live in more or less segregated neighborhoods or communities. But researches conducted at that time, at Chicago university proved it wasn't really so[13]. Tibbits predicted that a lot of older people will move to Arizona, California, Florida. It seems he predicted well for Florida.

Foster homes for the disabled are needed too, but they shouldn't be places of isolation but modern places, with better food services, and medical assistance. Tibbits ends the article by stressing that "housing and living arrangements for the retired have become recognized as one of the major phases of the total problem" (1954:308).

An interesting data that we find in Tibbits is that in the last quarter of the nineteenth century the population 65 years of age and older numbered a fewer than two million in the USA - less than 3,5 percent of the total population. In 1954 the control of the environment and discoveries in causes and treatment of disease have so extended life that the 50-year-old adult could then anticipate, on average, at least twenty-five additional years[14] (Tibbits, 1954:301). Technology increased workers productivity for two or even three times, therefore the work week was reduced by 40% since 1870 and in the separation of a majority of older persons from the work force. There will certainly be more retired persons that can be a burden to the pension system (the pay-as-you-go system [PAYGO]), but can we tell that a good solution, apart from prolonging the work life of a person, to replace the PAYGO system with a full private funded pension system? Boldrin et al., even though "public unfunded pension plans, currently in place in most European countries, are doomed to become fiscally, and therefore politically, untenable in about 15 to 25 years' time" (1999:312) , would say no[15]. In their opinion the PAYGO systems can be rescued by four conditions that could maintain the the pension/GDP ratio below or equal to its level in 1999 until 2050. Those conditions are: 1) reduce the ratio between new pensions and labor productivity by half a percentage point a year, while maintaining the real value of old pensions; 2) during 2000-50 find a way to restore male labor force participation rates to the levels of the early 1980s; 3) raise female participation rates to 80% of male rates by 2050; 4) cut unemployment rates for men to half their current level, and equate female and male unemployment rates by 2050.

So, what can we conclude? For starters, we can say that the evidence of reality showed a long time ago what is the direction of Western societies in concern of retirement and aging. Economists, sociologists, demographers have found out all the major problems, and they are stressing them out all the time, but it seems that public policies and politics (politicians) are deaf for those claims or there's not enough political courage among the Western political elite to make a major change in our societies in concern of the retirement and pension systems. Until the situation will not make a substantial change economists, sociologists and other social scientists will continue to publish research papers, journal articles and books if not for anything else than to say to the political elites "I told you so!", and, I would add "A long time ago!"


Anderson, Kathryn H., Richard V. Brukhauser, Joseph F. Quinn. 1986. "Do Retirement Dreams Come True? The Effect of Unanticipated Events on Retirement Plans." Industrial and Labor Relations Review 39(4):518-526.

Bernstein, Merton C. 1967. "The Future of Private Pension Plans." The Journal of Risk Insurance 34(1):15-26.

Boldrin, Michele, Juan J. Dolado, Juan F. Jimeno, Franco Peracchi, Friedrich Breyer, Raquel Fernandez. 1999. "The Future of Pensions in Europe." Economic Policy 14(29):289-320 .

Bongaarts , John. 2004. "Population Aging and the Rising Cost of Public Pensions ." Population and Development Review 30(1):1-23.

Fields, Gary S., Olivia S. Mitchell. 1984. "Economic Determinants of the Optimal Retirement Age: An Empirical Investigation." The Journal of Human Resources 19(2):245-262.

Giarini, Orio, Patrick M. Liedtke. 2006. The Employment Dilemma and the Future of Work. Report to the Club of Rome. Geneva: The Geneva Association.

Mitchell, Olivia S., James F. Moore. 1998. "Can Americans Afford To Retire? New Evidence on Retirement Saving Adequacy." The Journal of Risk Insurance 65(3):371-400.

Stock, James H., David A. Wise. 1990. "Pensions, the Option Value of Work, and Retirement." Econometrica 58(5):1151-1180.

Tibbits, Clark. 1954. "Retirement Problems in American Society." The American Journal of Sociology 59(4):301-308.

United Nations. 2003. Replacment Migration: Is It a Solution to Declining and Ageing Population? New York: United Nations.

[1] Probably an employee of the U. S. Department og Health, Education, and Welfare, as stated at the end of the article.

[2] Boldrin et al. (1999:297) didn't find any relationship between early retired and youth unemployment. The idea that stands behind the early retirement policy is that it would reduce youth unemployment, as if the number of of total jobs is a fixed one, so that retiring an older worker frees the same job for a younger one.

[3] For workers employed in 1969.

[4] $12,000,000,000.00 in 1954 had about the same buying power as $93,782,899,628.25 in 2009. Annual inflation over this period was about 3.81%. [source:, on July 7, 2009]

[5] Sorefully, I wasn't able to find the data for the year 2000 to compare it with the forecast.

[6] National Comitee of Ageing, Criteria for Retirement (New York: G. P. Putnam's Sons, 1953).

[7] A curiosity (at least for me): It is interesting, from the today's point of view, that Tibbits doesn't cite the sources to support his claim. I believe that such an article couldn't find its way to a scientific journal these days.

[8] Another indicator that retirement and employment are diffcult topics for the policy makers and governments in general is the fact that Giarini's and Liedtke's book was originally published in 1996, and republished as still actual in 2006.

[9] See Giarini and Liedtke (2006:126) who refer to Delsen, L./ Reday-Mulvey, G. 1996. Gradual Retirement in the OECD Countries.

[10] There are no studies about that phenomena and how the earned money is invested. My hypothesis is that it is invested in luxury spending as in more expensive cars, apartments or houses.

[11] See also Giarini and Liedtke (2006:126). They say that "[i]t's noteworthy that ignorance appears to be one of the bigger obstacles towards part-time work of older worker, especially when they are past the official retirement age." So, in order to have a good part-time older working person, we should invest in education too.

[12] However, Tibbits didn't provide the source of that claim.

[13] They were doing even studies on housing design for a greater comfort and safety for the elderly.

[14] Giarini and Liedtke (2006:126-127) claim that, as a matter of fact, the population in the West is getting younger, not older. Well, there are a lot of people over the age of 65, but, people that are 40, 50, 60, etc., are physically much "younger" (if take health and activity in consideration) than people of the same age 50 or more years ago. The real condition with age is that since 1950 the median age of the population of the developed world (North America, Japan, Europe, Austrlia/ New Zeland) has increased from 29 years to 37 years and should reach 45 years in 2050 (United Nations 2003).

[15] Boldrin et al. (1999) think that a switch to full funding is not politically feasibe since only unborn generations would profit from it, and even then, not all people would profit. Also Bernstein (1967) thought that a private fund won't the job, and Bongaarts too, but in 2004. It must be a mixed system. Again, we can see that ideas from 1967 were similar in 1999, and again in 2004.

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