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Retirement in the US - Essay Example

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Summary
Retirement is the condition where an individual ceases active or direct employment. Retirement can be total, where the individual terminates the total number of working hours completely or partial retirement where he or she reduces the number of working hours…
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Retirement in the US Essay
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Retirement in the US

Download file to see previous pages... Prior to the 19th Century, retirement was uncommon due to the average low life expectancy and absence of retirement benefits. As a result, workers continued working until their old age and death. Retirement was first introduced in Germany as the first country in the late 19th Century and with it, pension benefits were introduced and adopted (Feldstein & Liebman, 2002). In most developed countries and emerging economies, systems have been put in place to facilitate the provision of pensions upon retirement. These services can be financed by the respective states or employers. In less developed countries, the support of elderly is mainly provided by their families. A person has the right to retire at any age they desire. However, a state’s laws pertaining tax, terms of employ or pensions dictate a standard age accepted as the retirement age. The standard retirement age for different countries varies generally between the ages of 50 and 70 (Costa, 2000). In the United States, a lot of factors influence people’s decisions on retirement. A major contributing factor to this is Social Security. Social Security is a program for social insurance, which provides protection in a social sense against old age, illness, unemployment, poverty, disabilities among others. United States citizens are likely to retire a little earlier than the standard retirement age, which is 65 years, concurring with the public pension system (Costa, 2000). However, it is hard to conclude that financial incentives influence this retirement age. This is because the different financial incentives accorded to employees to retire offer mixed results as their results are actuarially fair. This means that the current value of retirement benefits does not vary with time. The value of the benefits does not increase whether considered at present or at a future time. Research has shown that individuals positively react significantly to the presence of financial incentives determining the age at which they retire (Feldstein & Liebman, 2002). Attractive packages for retirement at the full age or public standard age of a state for employees may influence the workers to continue working to reach this target so as to benefit fully from these packages. Greater wealth owned by individuals and high standards of living contribute to earlier ages of retirement (Jeffrey, 2006). This is because, they are more secure about their futures and are more inclined to enjoy their wealth without commitments of employment. In addition, they feel insured against the risk of poverty. The effect of wealth on individuals and their retirement ages is difficult to determine through empirical means because the source of the wealth might be as a result of lifetime savings over their productive life. This is partly due to the anticipation of early retirement. Economists have determined the effects of wealth on retirement and found that these effects are considerably small. According to Jeffrey (2006), “receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period” (p. 79). The effects of wealth shocks on employment are evaluated. In the United States, Americans are increasingly working past the traditional age of 65. The percentage of citizens past this age that are working has increased steadily in the recent decades from an average of 11.4 percent in 1990 to 16.2 percent in the year 2010 (Broom, 2012). In fact, the trend is ...Download file to see next pagesRead More
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