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In the 1880s, Chancellor Otto Von Bismarck of Germany faced an escalating crisis. Marxist uprisings were spreading across Europe, and some of his own citizens were advocating for socialist reforms. In an effort to neutralize these tensions and avoid more radical policies, Bismarck introduced an unprecedented social insurance program, where the government would provide pensions to nonworking elderly Germans.
Together with German Emperor William I, Bismarck presented this proposal in 1881, arguing to the Reichstag, or German Parliament, that 'those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.'*
As per historians at the American Social Security Administration, the common explanation behind the retirement age of 65 is that it coincided with Bismarck's own age at the time. However, this theory doesn't hold up. Initially, Germany set the retirement age at 70, not lowering it to 65 until long after Bismarck's death. In fact, the choice was more of a calculated cost-saving tactic, aligning with the average life expectancy of Germans during that era.
Despite Bismarck's strategy to outmaneuver the Marxists, he still faced backlash for introducing old-age pensions, with his far-right critics labeling him a socialist. This same accusation was later made against President Franklin Roosevelt when he brought the idea to the U.S. In 1935, the Committee on Economic Security, which created the American Social Security system, set the retirement age at 65. However, the SSA insists that the U.S. was not merely following Germany’s example. Like the German decision, it was a practical one. At the time, about half of the existing private and state-run old-age pension systems, as well as the federal Railroad Retirement System, had already established 65 as the retirement age, while the other half had set it at 70. Aligning with one of these options was sensible, and government actuarial studies showed that starting pensions at age 65 would make the system sustainable with moderate payroll taxes.
However, the system's sustainability was short-lived. In the 1980s, the SSA recognized that shifts in the workforce and retirement demographics would require adjustments. As a result, Congress has periodically modified Social Security withholding taxes and the age of eligibility. Currently, the retirement age for full benefits depends on the year of birth. In the meantime, Germany has also had to make revisions to its own historic system, proposing a gradual increase in the official retirement age to 67 over the next few years.
* A few years after, Bismarck and William passed the Imperial insurance order — known in German as the Reichsversicherungsverordnung — which required certain workers to contribute premiums to health insurance funds.
