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Retirement: An Historical Perspective

The practice of retiring and retirees receiving benefits in some fashion has only been around for a little over a century, right? Wrong! It’s been around for thousands of years.

In “The History of Retirement,” SageView Advisory Group outlines when retirement, and associated payments, began and how it all developed over the centuries. The Economic History Association provides additional historical context.

13 BC: Caesar Augustus, Emperor of the Roman Empire, offers Roman legionnaires a retirement package approximately 13 times their annual salary. The New Yorker adds that Caesar intended this to serve as an incentive to retired soldiers to remain loyal and not rise up against the government. They were eligible after serving for 20 years in a Roman legion and for five years in the military reserves.

5 BC: Caesar Augustus establishes a special fund to pay retired legionnaires; stops funding it from general revenues.

1592-93: The Parliament of England in this session established a pension for soldiers who put themselves in danger, lost limbs and became disabled. It was not to exceed 10 English pounds for private soldiers and 20 pounds for lieutenants.

1684: a London Port Authority official became the first civilian public servant to receive a pension.

1775: The Continental Congress established pensions for the American colonies’ naval forces.

1776: The new U.S. Congress established pensions for the U.S. Army.

1781: Congress authorized the payment of a life annuity equal to one-half base pay to all officers who stayed in the service for the rest of the Revolutionary War.

1783: Congress converted the life annuities for Army officers to a fixed-term payment equal to full pay for five years.

1799: First disability pension plan for U.S. Navy personnel established.

1832: Surviving Revolutionary War soldiers receive a pension equivalent to 100% of the base pay they were receiving at the end of the war.

1855: First formal retirement plan for U.S. Navy personnel established.

1857: New York City establishes the first pension plan for disabled municipal police officers.

1867: Congress authorized the retirement of seamen and marines who had served 20 or more years and who had become infirm due to old age, and payment of one-half their base pay for life.

1868: Surviving veterans of the War of 1812 receive pensions.

1875: First private-sector pension plan in the United States offered by American Express.

1878: New York City established a general retirement plan for police officers.

1884: B&O Railroad runs a pension plan that provides up to 35% of pay to workers who retired at age 65 and had worked for the company for at least 10 years, according to Workplace Consultants.

Pensions introduced in the German Empire by Chancellor Otto Von Bismark.

By 1910, municipal workers in the Austro-Hungarian Empire, Belgium, France, Germany, the Netherlands, Spain, Sweden and the United Kingdom were covered by retirement plans.

1911: Massachusetts establishes the first retirement plan for state employees.

1917: 85% of U.S. cities with populations of at least 100,000 provide at least some form of pension for their police forces.

1919: More than 300 private-sector pension plans exist.

1920: On May 22, the Federal Employees Retirement Act is enacted. It includes provisions stating that all classified civil service employees qualified for a pension after reaching age 70 and having rendered at least 15 years of service; mechanics, letter carriers and post office clerks were eligible for a pension after reaching age 65; and railway clerks qualified for a pension at age 62.

1928: The Monthly Labor Report says that pension plans for police and fire department personnel is “practically universal.”

1930: All federal workers have pension benefits; an increasing number of state and local government employees have pension benefits.

1930: 21 U.S. states had a retirement plan for their teachers.

1935: On Aug. 14, the Social Security Act is enacted.

1935: The Social Security Act is amended to allow women to begin taking reduced benefits at age 62 or full benefits at age 65.

1942: On Oct. 21, the Revenue Act of 1942 was enacted. Its provisions included forbidding employers to provide better pension benefits to only higher-paid employees and allowing employers to integrate and offset their contribution to Social Security benefits against pension benefits they provided, according to Workplace Consultants.

1961: On June 30, the Social Security Act is amended to allow men to receive reduced benefits at age 62.

1970: approximately 45% of private-sector employees are covered by a pension plan.

1974: on Sept. 2, the Employee Retirement Income Security Act of 1974 enacted.

1975: Cost-of-living adjustments adopted for Social Security benefits.

1978: On Nov. 6, the Revenue Act of 1978 enacted, adding Section 401(k) to the Internal Revenue Code, under which operate one of the primary retirement savings vehicles now in use in the United States.

1983: On April 20, the Social Security Act is amended to raise the retirement age from 65 to 67 for individuals born after 1959 and to make Social Security payments taxable.

1983: 40 million people are covered by private-sector pensions.

1986: On Oct. 22, Tax Reform Act of 1986 enacted; provisions include limiting contributions to 401(k)s from $30,000 to $7,000.

1990: Defined contribution plans cover 11.5 million U.S. workers.

2006: on Aug. 17, Pension Protection Act of 2006 enacted.

2011: 51 million U.S. workers have a 401(k) account.

2012: DC plans and IRAs together account for more than $10 trillion.

2016: According to U.S. News and World Report, 84% of U.S. retirees collect Social Security; 44% collect retirement benefits such as 401(k)s and 29% work for pay during retirement.