Mutual Funds and Inflation With James Dale Davidson – February 28, 2016
Guest: James Dale Davidson
The Income Generation With David J. Scranton
But one of the reasons companies didn’t mind providing pensions initially, is that life expectancies were far shorter at the time. In 1900, life expectancy for men and women was approximately 49 years at birth. People who reached age 60, could expect to live only an additional 12 years on average. Yet there was still no minimum or mandatory retirement age and most people continued to work as long as they were able. That, combined with the growing prosperity of the manufacturing based economy, meant that pensions were a financial hardship for many growing companies. By 1919, over 300 private pension plans existed covering about 15 percent of the nation’s wage and salary workers. As for the other 85 percent, they were still largely on their own until 1935 when Social Security was enacted. Importantly, it established 65 as the normal retirement age. At the time, life expectancy was still only about 60 years from birth. That means, Social Security was also enacted with the belief that most workers wouldn’t live for very long after retirement and therefore, it wouldn’t be a great burden on taxpayers. What’s more, according to the Social Security Administration when the program started there were approximately 40 working people paying into the system for every one retiree obviously that’s a healthy ratio. Meanwhile pension programs kept growing. By 1950, 9.8 million Americans or 25 percent of all private sector workers were covered by a pension. Over the next 20 years that number would increase to 26.3 million or 45 percent of all workers. Throughout all those years, however, life expectancies also continue to increase. This presented a growing financial challenge to the very concept of businesses and the government providing financial security for retired workers.
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