No Formal Retirement Age for Most Americans
Unlike today's system, where Social Security provides a benchmark for retirement age, the 1920s offered no such guarantee for the majority of the population. For most of the nation's history, up until the Great Depression, people worked until they were physically incapable of continuing. They did not pay into a government-funded system, nor did they receive benefits from one.
For the working-class families that made up the backbone of the economy, a long, leisurely retirement was not a realistic expectation. Instead, they relied on a combination of personal savings, family support, and—for some—the modest provisions of a private or state-level pension. The economic upheaval of the Great Depression, which began just a few years later, would expose the fragility of this system and highlight the desperate need for a more robust social safety net.
The Rise of Early Pension Systems
While most workers had no formal retirement plan in 1925, the concept of a pension was beginning to take hold in certain sectors. These early systems were not widespread and varied greatly in their provisions. The first private pension plan in the U.S. was established by American Express in 1875. By 1919, however, only about 15% of the workforce had a pension. The 1920s saw some modest growth in these plans, with certain federal and private sector employees gaining coverage.
Early Pension Systems by Sector
- Federal Government: The Civil Service Retirement System (CSRS), enacted in 1920, offered pensions to certain federal employees. It established mandatory retirement ages for some roles, including 70 for civil service employees with 15 years of service, 65 for mechanics and postal workers, and 62 for railway clerks.
- Railroad Industry: The railroad industry was a leader in offering pensions. By the 1920s, a significant portion of its workforce was covered by defined-benefit plans, which were considered the standard for retirement security at the time.
- State and Local Government: State-level pension plans for police, firefighters, and teachers became more common during this period. In 1925, Minnesota's government even performed a survey noting the cost-effectiveness of pensions over institutional care for the elderly.
- Private Industry: Early industrial pensions were often discretionary, meaning employers could modify or cancel them at any time. The Revenue Acts of 1921 and 1926 provided corporate income tax deductions for pension plans, encouraging more companies to establish them.
Comparison: Retirement in 1925 vs. Today
| Aspect | Retirement in 1925 | Retirement Today |
|---|---|---|
| Standard Retirement Age | No universal age existed for most people. | Full retirement age is determined by the Social Security Administration, currently between 66 and 67. |
| Primary Support | Reliance on family, personal savings, or inadequate state/private pensions. | Combination of Social Security, 401(k) plans, IRAs, and private pensions. |
| Life Expectancy | Roughly 54 years for both men and women. | Approximately 78.93 years (2020 data). |
| Pension Coverage | Very limited; only 15% of workers had a pension in 1919. | More widespread, but a shift from defined-benefit pensions to employee-funded defined-contribution plans (like 401(k)s). |
| Government Involvement | Minimal, with some state-level and federal civil service exceptions. | Significant, with the Social Security program serving as a foundational element of retirement planning. |
| Retirement Planning | Mostly nonexistent for the average worker; survival was the primary concern. | A deliberate and long-term process involving personal savings and strategic planning. |
The Catalyzing Role of the Great Depression
While the concept of retirement was already slowly evolving, the Great Depression was the major event that forced a fundamental shift in American attitudes toward social welfare. As economic conditions worsened, a large portion of the elderly population found themselves without any means of financial support, with over half of the elderly lacking sufficient income to be self-supporting by 1934. This widespread crisis demonstrated the failure of existing systems and the need for government intervention.
In response, President Franklin D. Roosevelt's administration introduced the Social Security Act of 1935. The act established a federal system of old-age benefits, with payments set to begin in 1942. This landmark legislation also set the official retirement age at 65. The choice of age 65 was a pragmatic one, based on observations of existing private and state pension systems and on actuarial studies. It marked the first time in U.S. history that a nationwide, government-backed retirement age and benefit system existed for the majority of workers.
The Harsh Realities for Workers in 1925
For the vast majority of workers in 1925, retirement was not an aspirational goal but an enforced reality caused by physical infirmity or economic hardship. Without a universal safety net, a decline in health meant a precipitous drop in income and a high likelihood of poverty. Workers could not expect to live much beyond the average life expectancy, and those who did often became financially dependent on their children or other family members for care and support.
This system was a stark contrast to the modern model. The burden of aging fell primarily on individuals and their immediate families. The idea of a federally-backed, predictable retirement was a foreign concept, a reflection of a different era defined by economic precarity and a much shorter average lifespan.
Conclusion
In 1925, the concept of a fixed retirement age for all Americans was nonexistent. The path to old age was a precarious one, with financial security depending on a patchwork of limited private pensions, modest state assistance, or—most commonly—the support of one's family. The absence of a universal safety net meant that many people worked until they were no longer able, with a life expectancy that barely exceeded the age that would later become the official retirement standard. It was the societal shock of the Great Depression that ultimately paved the way for the Social Security Act of 1935, which established the age of 65 as the new normal for a generation of retirees and forever changed the landscape of aging in America.
