Order Code RL30629
Older Workers: Employment and
Retirement Trends
Updated September 15, 2008
Patrick Purcell
Specialist in Income Security
Domestic Social Policy Division

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Older Workers: Employment and Retirement Trends
Summary
As the members of the “baby boom” generation — people born between 1946
and 1964 — approach retirement, the demographic profile of the U.S. workforce will
undergo a substantial shift: a large number of older workers will be joined by
relatively few new entrants to the labor force. According to the Census Bureau,
while the number of people between the ages of 55 and 64 will grow by about 11
million between 2005 and 2025, the number of people who are 25 to 54 years old
will grow by only 5 million. This trend could affect economic growth because labor
force participation begins to fall after age 55. In 2007, 91% of men and 75% of
women aged 25 to 54 participated in the labor force. In contrast, just 70% of men
and 58% of women aged 55 to 64 were either working or looking for work in 2007.
The rate of employment among persons age 55 and older is influenced by
general economic conditions, eligibility for Social Security benefits, the availability
of health insurance, and the prevalence and design of employer-sponsored pensions.
Labor force participation among people 55 and older may, for example, be affected
both by the trend away from defined-benefit pension plans that offer a monthly
annuity for life to defined contribution plans that typically pay a lump-sum benefit.
The declining percentage of employers that offer retiree health insurance also may
result in more people continuing to work until they are eligible for Medicare at 65.
Census Bureau data show that the percentage of men and women age 62 and
older who work in paid employment has risen over the past several years. In March
2008, 52% of men aged 62 to 64 were employed, compared with 43% in 1995 and
42% in 1990. Of men aged 65 to 69, 33% were employed in March 2008, compared
with 27% in 1995 and 26% in 1990. Among women 62 to 64 years old, 41% were
working in March 2008, compared with 32% in 1995 and 28% in 1990, whereas
among women 65 to 69 years old, 27% were working in March 2008, compared with
17% in 1995 and 1990. There also has been a trend toward more full-time
employment among older Americans who work. In March 2008, 82% of employed
men aged 62 to 64 were working full-time, compared with 77% in 1995 and 1990.
Seventy-two percent of men aged 65 to 69 who were working in March 2008 were
employed full-time, compared with 57% in 1995 and 56% in 1990. Among working
women aged 62 to 64, 65% worked full-time in March 2008, compared with 60% in
both 1995 and 1990, whereas among working women aged 65 to 69, 55% were
employed full-time in March 2008, compared with 43% in 1995 and 44% in 1990.
As more workers reach retirement age, employers may try to induce some of
them to remain on the job, perhaps on a part-time basis. This is sometimes referred
to as “phased retirement.” Several approaches to phased retirement — job sharing,
reduced work schedules, and rehiring retired workers on a part-time or temporary
basis — can be accommodated under current law. The Pension Protection Act of
2006 (P.L. 109-280) allows pension plans to begin paying benefits to workers who
have not yet separated from their employers at the earlier of age 62 or the pension
plan’s normal retirement age, which in most plans is 65. Some employers would like
to be able to pay partial pension distributions to workers who have reached the
pension plan’s early retirement age. This would require a change in federal law.

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Contents
The Aging of the Labor Force: 2005 to 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Long-Term Trends in Labor Force Participation Rates . . . . . . . . . . . . . . . . . . . . . 3
Recent Employment Trends Among People Aged 55 and Older . . . . . . . . . . . . . . 5
Retirement Income Among Older Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Employment Among Recipients of Retirement Income . . . . . . . . . . . . . . . . 9
Social Security Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Age When Benefits Begin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Retired Worked Beneficiaries as a Percentage of Each Age Category . . . . 12
Older Workers and “Phased Retirement” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Current Approaches to Phased Retirement . . . . . . . . . . . . . . . . . . . . . . . . . 14
Phased Retirement and Pension Distributions . . . . . . . . . . . . . . . . . . . 14
Distributions from 401(k) Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
List of Tables
Table 1. U.S. Population Age 25 and Older, 2005 and 2025 . . . . . . . . . . . . . . . . 2
Table 2. Labor Force Participation Rates, 1950 to 2007 . . . . . . . . . . . . . . . . . . . . 4
Table 3. Employment of Men Aged 55 and Older, 1990 to 2008 . . . . . . . . . . . . . 6
Table 4. Employment of Women Aged 55 and Older, 1990 to 2008 . . . . . . . . . . 7
Table 5. Receipt of Income from Employer Pensions and Retirement
Savings Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 6. Employment of Recipients of Employer Pensions and
Retirement Savings Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 7. Social Security Retired Worker Benefit Awards, by Age . . . . . . . . . . . 12
Table 8. Social Security Retired Worker Beneficiaries, by Age . . . . . . . . . . . . . 13

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Older Workers: Employment
and Retirement Trends
The retirement of older workers affects both their personal economic
circumstances and the nation’s economy. The number of people retiring each year
affects the size of the labor force, which has a direct impact on the economy’s
capacity to produce goods and services. Other things being equal, fewer retirements
in any given year would result in a greater supply of experienced workers available
to employers and fewer people relying on savings, pensions, and Social Security as
their main sources of income. Consequently, changes in the age-profile of the
population and the average age at which people retire have implications for both the
growth of national income and the size and composition of the federal budget.
To understand the factors that affect the retirement decision, one must first
know what it means to “retire.” Retirement is most often defined with reference to
two characteristics: whether an individual participates in the paid labor force, and
whether he or she receives income from a pension or Social Security. An individual
who does not work for compensation and who receives income from pensions or
Social Security would be retired according to both parts of this definition, while one
who works for compensation and receives no income from pensions or Social
Security would not be retired according to either part of the definition.
Between these two extremes, however, there are many people who might be
considered to be retired based on one part of the definition but not the other. For
example, individuals who have retired from careers in law enforcement or the
military — both of which typically provide pensions after 20 years of service — often
work for many years at other jobs, while also receiving a pension from their prior
employment. In such cases, having retired from a particular occupation does not
necessarily mean that one has retired from the workforce. On the other hand, many
people who retire from full-time employment continue to work part-time to
supplement the income they receive from pensions and Social Security. If the
majority of their income is provided by Social Security, pensions, and savings,
economists typically classify them as retired, even though they continue to engage in
paid employment. As these examples suggest, not everyone who receives pension
income is retired, and some people who work for pay actually are retired.
This report begins by describing the change in the age distribution of the U.S.
population that will occur between 2005 and 2025 and by summarizing the historical
data on the labor force participation of older workers. This discussion is followed
by an analysis of data from the Census Bureau’s Current Population Survey on
employment and receipt of pension income among persons age 55 and older.
Employment trends among older workers are then discussed in the context of data
from the Social Security Administration on the proportion of workers who claim
retired-worker benefits before the full retirement age (65 years and 10 months for

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CRS-2
people who turn 65 in 2008). The final section of the report discusses “phased
retirement,” a process that combines reduced hours of work with receipt of pension
income.
The Aging of the Labor Force: 2005 to 2025
As the members of the “baby boom” generation — people born between 1946
and 1964 — reach retirement age, the demographic profile of the American
population will undergo a profound change. According to the Census Bureau, the
proportion of the U.S. population aged 65 and older will increase from 12.4% in
2005 to 18.2% by 2025. The age-distribution those 25 to 64 years old already is
undergoing a substantial shift toward a greater number of older individuals and a
relative scarcity of young people entering the labor force.
The data presented in Table 1 show how the age profile of the U.S. population
will change between 2005 and 2025. According to the Census Bureau, there were
193 million Americans aged 25 or older in 2005. By 2025, this number will increase
by 22% to almost 236 million. However, the number of people 25 to 54 years old —
the ages when labor force participation rates are highest — will increase by only
3.8%. At the same time, the number of people between the ages of 55 and 64 is
projected to increase by 11 million, or more than 36%. In other words, while the
number of people between the ages of 25 and 64 is projected to increase by about 16
million between 2005 and 2025, more than two-thirds of the increase is projected to
occur among people between the ages of 55 and 64.
Table 1. U.S. Population Age 25 and Older, 2005 and 2025
(numbers in thousands)
Age Groups
Year
Total
25 to 34
35 to 44
45 to 54
55 to 64 65 and Up
2005
Male
20,081
21,773
20,852
14,618
15,299
92,623
Female
19,608
21,878
21,589
15,758
21,398
100,231
Total
39,689
43,651
42,441
30,376
36,697
192,854
2025
Male
22,529
22,886
20,241
20,130
27,801
113,587
Female
21,906
22,512
20,485
21,290
35,724
121,917
Total
44,435
45,398
40,726
41,420
63,525
235,504
Change
4,746
1,747
-1,715
11,044
26,828
42,650
% change
12.0%
4.0%
-4.0%
36.4%
73.1%
22.1%
Source: U.S. Department of Commerce, Bureau of the Census.

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CRS-3
Long-Term Trends in Labor Force
Participation Rates
The labor force participation rate is the percentage of the population that is
either employed or unemployed and looking for work; it varies by age and sex.
Moreover, labor force participation rates have changed over time as people have
responded to economic incentives and as the norms and values of society have
changed with respect to the employment of women and the retirement of older
workers. Also, as the United States has moved from an economy based on
“smokestack industries” such as mining and manufacturing to a service-based
economy, there has been an increase in demand for highly-educated workers and
relatively less demand for workers who are able to perform physically demanding
labor. At the same time that the economy has been producing jobs that can be done
by workers of more varied physical abilities, the two-earner couple has become the
rule rather than the exception it was 30 or 40 years ago. Finally, with near universal
coverage by Social Security and about half of all workers participating in an
employer-sponsored pension or retirement savings plan, many workers now
anticipate retirement as an opportunity for leisure and recreation rather than as a time
of financial dependency on their children.
Men who are over the age of 55 are less likely to participate in the labor force
today than their counterparts of a half-century ago. According to data from the
Bureau of Labor Statistics, in the 1950s, 5 out of 6 men aged 55 to 64 participated
in the labor force; that is, they were either working or actively looking for work.1
(See Table 2). By 1985, only 2 out of 3 men in that age group participated in the
labor force. Most of the decline occurred over a relatively brief period, from about
1970 to the mid-1980s. Among men 65 and older, the decline in labor force
participation began earlier, but it also appears to have ended around 1985. Between
1950 and 1985, the labor force participation rate among men 65 and older fell from
46% to about 16%. Since 1995, the labor force participation rate among men aged
55 to 64 has risen from 66% to 70%, while the labor force participation rate for men
aged 65 and older has increased from 17% to 21%.
From 1950 to the present, women’s labor force participation rates have steadily
increased. Among women aged 55 to 64, the labor force participation rate rose from
27% in 1950 to 45% in 1990, and to 58% in 2007. Among women aged 65 and
older, however, the labor force participation rate fell from 11% in 1955 to 7.3% in
1985. Since then, the labor force participation rate of women 65 and older has slowly
but steadily risen, reaching 12.6% in 2007.
1 Labor force participation rates are annual averages from the monthly CPS data. They are
published annually in the January issue of the BLS publication, Employment and Earnings.

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CRS-4
Table 2. Labor Force Participation Rates,
1950 to 2007
Age Groups
Year
25 to 54
55 to 64
65 and Up
Men
1950
96.5%
86.9%
45.8%
1955
97.4
87.9
39.6
1960
97.0
86.8
33.1
1965
96.7
84.6
27.9
1970
95.8
83.0
26.8
1975
94.4
75.6
21.6
1980
94.2
72.1
19.0
1985
93.9
67.9
15.8
1990
93.4
67.8
16.3
1995
91.6
66.0
16.8
2000
91.6
67.3
17.5
2001
91.3
68.1
17.7
2002
91.0
69.2
17.8
2003
90.6
68.7
18.6
2004
90.5
68.7
19.0
2005
90.5
69.3
19.8
2006
90.6
69.6
20.3
2007
90.9
69.6
20.5
Women
1950
36.8%
27.0%
9.7%
1955
39.8
32.5
10.6
1960
42.9
37.2
10.8
1965
45.2
41.1
10.0
1970
50.1
43.0
9.7
1975
55.1
40.9
8.2
1980
64.0
41.3
8.1
1985
69.6
42.0
7.3
1990
74.0
45.2
8.6
1995
75.6
49.2
8.8
2000
76.8
51.8
9.4
2001
76.4
53.0
9.7
2002
76.0
55.1
9.9
2003
75.6
56.6
10.6
2004
75.3
56.3
11.1
2005
75.3
57.0
11.5
2006
75.5
58.2
11.7
2007
75.4
58.3
12.6
Source: U.S. Department of Labor, Bureau of Labor Statistics.

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CRS-5
Recent Employment Trends
Among People Aged 55 and Older
Factors that influence the rate of employment among persons aged 55 and older
include the state of the job market, the availability of health insurance, eligibility for
Social Security benefits, and both the prevalence and design of employer-sponsored
pensions. Labor force participation among people 55 and older might, for example,
be affected by the trend away from defined-benefit pension plans, which often
include early-retirement subsidies and pay a guaranteed benefit for life, toward
defined contribution plans, which are age-neutral in design and often pay out a single
lump sum at retirement. Relatively few employers offer retiree health insurance, and
so some workers may choose to remain employed until they become eligible for
Medicare at age 65.
Data collected by the Census Bureau indicate that between 1990 and 2008,
employment remained generally steady among men 55 to 61 years old and rose
among women in this age group.2 (See Table 3 and Table 4). Among men aged 55
to 61, 73% were employed in March 2008, compared with 72% in March 1990.
Employment among women aged 55 to 61 rose to 63% in March 2008 from 50% in
March 1990. Among both men and women aged 62 to 64, employment rose through
this period. Fifty-two percent of 62- to 64-year-old men were employed in March
2008, compared with 42% in March 1990. The proportion who worked full-time
rose from 77% to 82%. Among women aged 62 to 64, employment increased from
28% in March 1990 to 41% in March 2008. The percentage of 62- to 64-year-old
working women who were employed full-time increased from 61% to 65%.
Among men 65 to 69 years old, employment also has risen since 1990: 26% of
men aged 65 to 69 were employed in March 1990, whereas 33% were employed in
March 2008. The percentage of working 65- to 69-year-old men employed full-time
rose from 56% in March 1990 to 72% in March 2008. Employment also increased
among women aged 65 to 69 between 1990 and 2008. In March 2008, 27% of
women aged 65 to 69 were working, compared with 17% in 1990. The percentage
of 65- to 69-year-old working women who worked full time rose from 44% in 1990
to 55% in 2008. Among both men and women aged 70 and older, rates of
employment rose slightly between 1990 and 2008. In March 2008, 14% of men aged
70 and older were employed, compared with 10% in 1990. Among women aged 70
and older, 8% were employed in March 2008, compared with 5% in March 1990.
2 The labor force participation rates discussed in the previous section were based on annual
averages of monthly data. The employment data in this section are from the March
supplement to the CPS, and show employment in the week prior to the CPS interview. The
March CPS files were used for this analysis because they include detailed data about sources
of income in the previous year. CRS used information about current labor force status rather
than information about labor force status in the previous year because an individual who
reported that he or she both worked and received pension income during the previous year
might have worked and received pension income consecutively rather than concurrently.

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CRS-6
Table 3. Employment of Men Aged 55 and Older, 1990 to 2008
Employed
Employment
Age in
Population
Workers
March
(thousands)
(thousands)
Percent
Full-Time Part-Time
55 to 61

1990
7,248
5,219
72.0
91.2
8.8
1995
7,409
5,349
72.2
89.5
10.5
2000
8,204
5,849
71.3
92.3
7.7
2005
10,554
7,666
72.6
92.1
7.9
2006
11,221
8,149
72.6
91.9
8.1
2007
11,774
8,625
73.3
91.7
8.3
2008
12,270
8,954
73.0
92.8
7.2
62 to 64


1990
2,903
1,228
42.3
76.6
23.4
1995
2,681
1,159
43.2
76.6
23.4
2000
2,927
1,380
47.2
77.9
22.1
2005
3,481
1,77
51.1
79.5
20.6
2006
3,644
1,883
51.7
80.6
19.4
2007
3,696
1,822
49.3
81.3
18.7
2008
3,800
1,968
51.8
82.0
18.0
65 to 69

1990
4,586
1,189
25.9
55.6
44.4
1995
4,522
1,237
27.4
57.3
42.7
2000
4,376
1,330
30.4
60.5
39.5
2005
4,814
1,428
29.7
67.5
32.5
2006
4,782
1,497
31.3
69.0
31.0
2007
5,013
1,655
33.0
70.7
29.3
2008
5,238
1,721
32.9
72.2
27.8
70 and Older

1990
7,961
772
9.7
47.2
52.8
1995
8,738
989
11.3
46.5
53.5
2000
9,510
1,169
12.3
48.5
51.5
2005
10,337
1,379
13.3
50.8
49.2
2006
10,402
1,441
13.9
50.4
49.6
2007
10,430
1,508
14.5
53.1
46.9
2008
10,524
1,500
14.3
55.5
44.5
Source: Congressional Research Service analysis of the Current Population Survey.

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CRS-7
Table 4. Employment of Women Aged 55 and Older,
1990 to 2008
Employed
Employment
Age in
Population
Workers
March
(thousands) (thousands)
Percent
Full-Time
Part-Time
55 to 61

1990
7,830
3,916
50.0
70.8
29.2
1995
7,947
4,314
54.3
74.8
25.2
2000
9,041
5,250
58.1
77.2
22.8
2005
11,650
7,086
60.8
78.9
21.1
2006
12,066
7,466
61.9
78.8
21.2
2007
12,533
7,817
62.4
79.2
20.8
2008
13,032
8,262
63.4
79.5
20.5
62 to 64

1990
3,351
941
28.1
60.5
39.5
1995
3,044
968
31.8
59.5
40.5
2000
3,209
1,109
34.6
61.4
38.6
2005
3,834
1,401
36.5
67.2
32.8
2006
4,038
1,661
41.1
68.7
32.3
2007
4,179
1,746
41.8
68.5
31.5
2008
4,189
1,736
41.4
65.3
34.7
65 to 69


1990
5,537
920
16.6
43.6
56.4
1995
5,224
865
16.6
42.7
57.3
2000
4,976
983
19.7
44.2
55.8
2005
5,311
1,193
22.5
51.4
48.6
2006
5,449
1,247
22.9
52.7
47.3
2007
5,616
1,438
25.6
54.0
46.0
2008
5,927
1,570
26.5
55.3
44.7
70 and Older


1990
12,000
600
5.0
32.8
67.2
1995
13,174
681
5.2
29.8
70.2
2000
13,759
816
5.9
36.3
63.7
2005
14,752
1,041
7.1
37.1
62.9
2006
14,872
993
6.7
38.8
61.2
2007
14,977
1,160
7.8
40.0
60.0
2008
15,100
1,135
7.5
40.9
59.1
Source: Congressional Research Service analysis of the Current Population Survey.

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CRS-8
Retirement Income Among Older Workers
An important consideration for anyone contemplating retirement is whether
future income sources will be adequate to maintain his or her desired standard of
living. Table 5 shows the proportion of men and women aged 55 and older who
reported on the Census Bureau’s Current Population Survey (CPS) that they received
pension income of some kind during the calendar year prior to the survey. In this
table, “pension income” includes employer-sponsored pensions (including military
retirement), veterans’ pensions, and periodic payments from annuities, insurance
policies, individual retirement accounts, 401(k) accounts, and Keogh plans for the
self-employed.3 Not surprisingly, the proportion of men and women who receive
income from a pension or other retirement plan increases with age. In 2007, only
17% of men aged 55 to 64 received income from a pension or other retirement plan.
Among those aged 65 or older, 42% had income from pensions or retirement savings
plans. The patterns among women were similar: only 11% of 55- to 64-year-old
women received income from pensions or retirement savings plans in 2007, whereas
28% of those aged 65 or older received such income.
The 17% of men aged 55 to 64 who were receiving pension income in 2007
represents a decline from 23% who received such income in 1990 and 1995. Over
the same period, the proportion of men aged 65 or older receiving pension income
also fell, declining from 49% in 1990 to 42% in 2007. The proportion of women aged
55 to 64 with pension income fell slightly from 13% in 1990 to 11% in 2006.
Among women 65 or older, 28% received income from pensions and retirement
savings plans in 2007, little changed from 28% in 1990 and 27% in 1995.
To study the relationship between employment rates and receipt of pension
distributions, we grouped the men and women into two age categories, 55 to 64 and
65 and older, and calculated the correlation coefficient between the percentage who
were employed and the percentage who received pension income. Among men, there
is a negative correlation between receipt of pension income and employment. Over
the period from 1994 to 2007, the correlation between current employment and
receipt of pension income was -0.87 for men 55 to 64 years old and -0.84 for men 65
and older. However, the statistics do not tell us why employment has risen among
men 55 and older while the receipt of pension income has fallen. One possible
explanation is that each year a smaller percentage of workers are covered by defined
benefit plans, which often have generous early retirement subsidies and pay a
monthly benefit that is guaranteed for life. Workers whose main retirement plan is
a defined contribution plan (such as a 401(k)) might be choosing to delay retirement
in order to build up larger account balances or to make up for past investment losses.

Among women, the percentage who were employed and the percentage who
received pension income were not strongly correlated over the period from 1994 to
2007 (0.14 for women aged 55-64 and 0.16 for women 65 and older). This is partly
3 Lump-sum distributions from employer-sponsored retirement plans are not counted as
income on the CPS. To the extent that individuals take lump-sum distributions from these
plans and deposit the funds into non-retirement account from which they make withdrawals
to supplement their income, the CPS underestimates retirement income.

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CRS-9
due to the fact that the rate of labor force participation among women under age 65
has been rising steadily over many years. Thus, one reason that the percentage of all
women 55 and older who receive pension income has not fallen along with that of
men is that an increasing percentage of women have earned retirement benefits
through their own employment. This could mask a decline in the percentage of
working women who are (or will be) eligible to receive pension distributions.
Table 5. Receipt of Income from Employer Pensions and
Retirement Savings Plans
(in thousands)
Individuals 55 to 64 Years Old
Individuals Aged 65 and Older
Number of Number of
Number of Number of
People
Recipients Percentage
People
Recipients
Percentage
Men
1990
10,152
2,368
23.3
12,547
6,178
49.2
1995
10,090
2,279
22.6
13,260
6,206
46.8
2000
11,249
2,124
18.9
14,179
6,099
43.0
2001
12,366
2,371
19.2
14,235
6,276
44.1
2002
13,149
2,372
18.0
14,527
6,414
44.2
2003
13,531
2,450
18.1
14,797
6,656
45.0
2004
14,034
2,578
18.4
15,151
6,778
44.7
2005
14,865
2,709
18.2
15,185
6,539
43.1
2006
15,469
2,692
17.4
15,443
6,739
43.6
2007
16,069
2,677
16.7
15,762
6,552
41.6
Women
1990
11,182
1,479
13.2
17,538
4,962
28.3
1995
10,991
1,164
10.6
18,398
5,025
27.3
2000
12,532
1,475
11.8
18,799
5,426
28.9
2001
13,501
1,525
11.3
19,535
5,412
27.7
2002
14,229
1,572
11.0
19,706
5,379
27.3
2003
14,824
1,705
11.5
19,862
5,610
28.2
2004
15,484
1,776
11.5
20,063
5,603
27.9
2005
16,104
1,959
12.2
20,320
5,901
29.0
2006
16,712
1,940
11.6
20,593
5,786
28.1
2007
17,220
1,883
10.9
21,027
5,840
27.8
Source: Congressional Research Service analysis of the Current Population Survey.
Notes: Retirement plans may include a traditional pension, a retirement savings plan, or both. The
year shown is the year when the income was received, which is the calendar year preceding the March
CPS interview.
Employment Among Recipients of Retirement Income
The data displayed in Table 5 show the number and percentage of people 55
and older who received pensions or distributions from retirement accounts. The data
in Table 6 show that among men aged 55 to 64 who received income from a pension
or retirement savings plan during 2007, 37.4% were employed either full or part time
in March 2008. Relatively few men aged 65 or older who received income from
pensions or retirement savings plans also engaged in paid employment: only 10%

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CRS-10
to 13% were employed, on average, at any point during the period shown in the
table. Women who receive pension income were less likely than men to be
employed. Among women 55 to 64 years old who received income from a pension
or retirement savings plan in 2007, 35.1% were employed in March 2008. Among
women aged 65 or older who received income from a pension or retirement savings
plan, only 6% to 9%, on average, were employed at any time during the period from
1990 to 2007.
Table 6. Employment of Recipients of Employer Pensions
and Retirement Savings Plans
(in thousands)
Recipients, Aged 55 to 64
Recipients, Aged 65 and Older
Number of
Number
Number of
Number
Recipients
Employed Percentage Recipients
Employed Percentage
Men
1990
2,368
879
37.1
6,178
643
10.4
1995
2,279
831
36.5
6,206
726
11.7
2000
2,124
797
37.5
6,099
721
11.8
2001
2,371
907
38.3
6,276
739
11.8
2002
2,372
827
34.9
6,414
745
11.6
2003
2,450
959
39.1
6,656
839
12.6
2004
2,578
982
38.1
6,778
836
12.3
2005
2,709
1,081
39.9
6,539
771
11.8
2006
2,692
1,102
40.9
6,739
846
12.6
2007
2,677
1,000
37.4
6,552
799
12.2
Women
1990
1,479
392
26.5
4,962
345
7.0
1995
1,164
324
27.9
5,025
281
5.6
2000
1,475
488
33.1
5,426
436
8.0
2001
1,525
439
28.8
5,412
393
7.3
2002
1,572
530
33.7
5,379
425
8.0
2003
1,705
560
32.9
5,610
454
8.1
2004
1,776
553
31.1
5,603
416
7.4
2005
1,959
675
34.5
5,901
457
7.7
2006
1,940
682
35.2
5,786
504
8.7
2007
1,883
662
35.1
5,840
528
9.0
Source: Congressional Research Service analysis of the Current Population Survey.
Note: Retirement plans may include a traditional pension, a retirement savings plan, or both. The
income year is the year prior to the survey. Employment is in current year.

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CRS-11
Social Security Retirement Benefits
Age When Benefits Begin
In 2008, full retirement benefits under Social Security are available at age 65
and 10 months. Social Security retired-worker benefits are first available at age 62,
but benefits that begin before the full retirement age are permanently reduced. In
2008, a worker who begins receiving Social Security at age 62 has his or her benefit
permanently reduced by 25% below the amount that would be payable at the full
retirement age. As a result of the Social Security Amendments of 1983 (P.L. 98-21),
the Social Security full retirement age is being increased to 67 incrementally over a
22-year period. Reduced benefits will continue to be available as early as age 62, but
when the full retirement age reaches 67, the benefit payable at 62 will be 30% less
than the amount that would be paid if benefits were claimed at age 67.
Most people choose to begin receiving Social Security retirement benefits before
age 65. The data presented in Table 7 show that 71% of men and 75% of women
who began receiving Social Security retired-worker benefits in 2006 applied for
benefits before age 65. In 2000, a higher-than-average percentage of new benefits
were awarded to persons 65 and older. This was mainly attributable to the repeal of
the Social Security earnings test for workers who are at or above the Social Security
normal retirement age. Prior to 2000, the earnings test reduced the Social Security
benefits of recipients under age 70 whose earnings exceeded specific thresholds. P.L.
106-182 eliminated the earnings test for people at the full retirement age or older,
effective January 1, 2000.4 The earnings test now applies only to beneficiaries who
are under the full retirement age. With the repeal of the earnings test for people aged
65 and older, workers who had deferred receipt of Social Security because their
earnings would have resulted in a benefit reduction had an incentive to apply for
benefits. Workers who delay receipt of benefits until they are beyond the full
retirement age remain eligible for the delayed retirement credit, which permanently
increases their benefits, providing an incentive for workers to remain employed.
4 In 2008, a Social Security recipient under the full retirement age can earn up to $13,560
without a benefit reduction. Benefits are cut by $1 for each $2 earned over that amount.

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CRS-12
Table 7. Social Security Retired Worker Benefit Awards, by Age
(Age in Year When Retired Worker Benefits Began)
62 to 64
65
Over 65
Percentage of
Percentage of
Percentage of
Awards
All Awards
Awards
All Awards
Awards
All Awards
Men
1990
637,100
74.4
158,300
18.5
60,800
7.1
1995
614,700
76.1
144,400
17.9
48,700
6.0
2000a
637,000
64.5
226,000
22.9
124,800
12.6
2001
650,000
75.1
179,000
20.7
36,700
4.2
2002
673,000
76.9
171,600
19.6
30,300
3.5
2003
653,300
76.4
173,300
20.2
28,900
3.4
2004
671,700
75.1
188,600
21.1
34,500
3.8
2005
693,000
73.3
210,800
22.3
41,700
4.4
2006
659,300
71.0
236,700
25.5
32,600
3.5
Women
1990
494,800
80.0
85,900
13.9
37,700
6.1
1995
492,900
79.9
87,800
14.2
36,300
5.9
2000a
574,700
74.5
118,700
15.4
77,700
10.1
2001
556,200
78.5
102,000
14.4
50,100
7.1
2002
581,700
80.7
103,500
14.4
35,400
4.9
2003
582,400
78.9
111,000
15.1
44,300
6.0
2004
615,100
80.3
124,400
16.2
26,700
3.5
2005
649,800
76.6
143,400
16.9
55,000
6.5
2006
631,900
74.9
158,900
18.8
52,400
6.2
Source: Annual Statistical Supplement to the Social Security Bulletin, various years.
Note: Initial awards exclude conversions from disabled worker to retired worker benefits.
a. The earnings test was repealed in 2000 for workers above the Social Security full retirement age.
Retired Worked Beneficiaries as a
Percentage of Each Age Category
The data presented in Table 8 show that in 2006, 38.1% of men aged 62 to 64
were receiving Social Security retired worker benefits. This was 8.7 percentage
points lower than in 1995, a decline that coincided with the rising employment rates
among men in this age group. (See Table 4.) The decline in the percentage of 62-
to 64-year-old men receiving Social Security benefits during this period could have
several causes, including the move away from defined benefit plans to defined
contribution plans among employers in the private sector and the desire among
workers under age 65 to remain covered under an employer-sponsored health
insurance plan until they become eligible to participate in Medicare at age 65.
Among women, the percentage of 62- to 64-year-olds who were receiving Social
Security retired worker benefits was generally stable over the period from 1990 to
2000 at about 36%, but by 2006, the percentage had fallen to 34.3%.
Among men aged 65 to 69, the proportion who were receiving Social Security
retired worker benefits rose abruptly from 84% in 1999 to 91% in 2000, coinciding
with the repeal of the earnings test for workers at or above the full retirement age.
Since then, this percentage has been fairly stable. Among women aged 65 to 69, the

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CRS-13
proportion who were receiving Social Security retired worker benefits increased from
55.6% in 1990 to 67.6% in 2006. This trend is consistent with the long-term increase
in the proportion of women who are eligible for Social Security benefits based on
their own earnings histories rather than as the spouses of retired workers.
Table 8. Social Security Retired Worker Beneficiaries, by Age
62 to 64
65 to 69
70 and Over
Percentage
Percentage
Percentage
Number
Of Age
Number
Of Age
Number
Of Age
(thousands)
Group
(thousands)
Group
(thousands)
Group
Men
1990
1,336
45.3
3,898
83.8
7,751
91.7
1995
1,320
46.8
3,900
83.4
8,694
91.2
2000
1,330
43.2
4,076
90.8
9,366
90.3
2001
1,333
41.8
4,125
91.4
9,473
90.3
2002
1,333
40.4
4,198
91.0
9,578
91.1
2003
1,331
39.9
4,255
91.8
9,667
91.9
2004
1,373
38.4
4,270
90.4
9,796
91.6
2005
1,430
38.4
4,289
91.0
9,935
93.8
2006
1,424
38.1
4,357
90.1
10,087
93.3
Women
1990
1,167
35.9
3,067
55.6
7,607
55.9
1995
1,128
36.8
3,058
56.7
8,570
57.7
2000
1,223
36.0
3,209
63.1
9,302
59.7
2001
1,237
35.3
3,284
64.5
9,390
60.0
2002
1,246
34.4
3,369
63.2
9,480
59.6
2003
1,256
34.0
3,475
65.3
9,563
60.5
2004
1,313
33.2
3,544
65.5
9,677
60.6
2005
1,394
34.1
3,621
66.9
9,806
61.3
2006
1,416
34.3
3,742
67.6
9,949
61.9
Source: Annual Statistical Supplement to the Social Security Bulletin, various years.
Older Workers and “Phased Retirement”
In the traditional view of retirement, a worker moves from full-time
employment to complete withdrawal from the labor force in a single step. In fact,
however, many workers choose to continue working after they have retired from their
“career” jobs. The process of retiring often occurs gradually over several years, with
some workers retiring from year-round, full-time employment and moving to part-
time or part-year work at another firm, often in a different occupation. The data in
Table 6, for example, show that 37% of men and 35% of women aged 55 to 64 who
received income from a pension in 2007 were employed in March 2008.
As members of the baby-boom generation begin to retire, millions of skilled and
experienced workers will exit the labor force. As this occurs, employers may find it
necessary to alter their employment practices and pension plans to induce some of
those who would otherwise retire to remain on the job, perhaps on a part-time or part-
year schedule. This process is sometimes referred to as phased retirement. No
statutory definition of phased retirement exists, but one analyst has described it as

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CRS-14
“the situation in which an older individual is actively working for an employer part
time or [on] an otherwise reduced schedule as a transition into full retirement. [It]
may also include situations in which older employees receive some or all of their
retirement benefits while still employed.”5
Prior to enactment of the Pension Protection Act of 2006 (PPA, P.L. 109-280),
an employee could take distributions from an employer’s defined benefit pension
only after having separated from the employer or after having reached the pension
plan’s normal retirement age, which by law cannot be greater than 65. Section 905
of the PPA amended the Employee Retirement Income Security Act of 1974 (ERISA)
such that distributions from a qualified retirement plan to an employee who has not
separated from the employer can begin at age 62, even if this is younger than the
plan’s normal retirement age. Some employers have suggested phased retirement
would be embraced by more firms if pension distributions could be paid to
employees at the plan’s early retirement age. Employers could offer in-service
distributions to employees who have reached the plan’s early retirement age but who
have not separated from the employer only if the Internal Revenue Code and ERISA
were amended to allow such early distributions.
Current Approaches to Phased Retirement
Employers have devised a number of strategies to retain the services of
employees who are eligible to retire and who might be lost to the firm if the only
options available to them are full-time employment or full-time retirement. Some
firms allow retirement-eligible employees to work fewer days per week or fewer
hours per day. Some also permit employees to reduce their workload through job-
sharing. Firms sometimes rehire retired employees on a part-time or temporary basis,
or bring them back as contractors or consultants rather than as regular employees.
Two of these arrangements — hiring retired former employees on a part-time or
temporary basis and hiring retirees as contractors — require the individual to separate
from the employer before returning under an alternative work arrangement. This
introduces considerable uncertainty into the process for both the retiree and the
employer, because once the employment relationship is severed, neither party is
legally bound to renew it.
Phased Retirement and Pension Distributions. Unless an employee has
reached the earlier of age 62 or the pension plan’s normal retirement age, the plan
cannot pay retirement benefits to the individual while he or she remains employed
by the firm, even if only on a part-time basis. In order to qualify for the favorable tax
status granted to tax-qualified pension plans, the plan must pay benefits only on
condition of death, disability, termination of employment, plan termination, or at the
normal retirement age.6 A plan that pays benefits to an employee who has not yet
5 Testimony of Wilma K. Schopp on behalf of the Association of Private Pension and
Welfare Plans before the U.S. Senate Special Committee on Aging, April 3, 2000.
6 26 C.F.R. § 1.401-1(b)(1)(i).

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CRS-15
reached the plan’s normal retirement age could lose its tax-qualified status.7 An
employee who has reached age 62 or the pension plan’s normal retirement age can
begin to receive distributions from the plan, even if he or she continues to be
employed by the firm.8 Likewise, an employee who has reached the plan’s early
retirement age can begin to receive distributions from the plan upon separation from
the firm, provided that he or she has completed the required number of years of
service stipulated by the plan. If a participant has separated from the employer and
has begun receiving distributions from the plan at the early retirement age, he or she
can continue to receive these distributions, even if at some future date the participant
becomes re-employed by the plan sponsor. In order to retain the plan’s tax-qualified
status, however, the employer may be required to demonstrate to the Internal
Revenue Service that “both a bona fide retirement (or other termination of
employment) and a legitimate rehire have occurred.”9
One way for a firm to offer phased retirement to these workers under current
law, without jeopardizing the tax-qualified status of its pension plan, would be for
it to lower the normal retirement age. For example, if the normal retirement age
under the plan is 62 and the early retirement age is 55, the firm could reduce the
normal retirement age to some age between 55 and 62. From the employer’s point
of view, there would be at least two potential drawbacks to such an approach. First,
it could result in an unintended exodus of workers into retirement, because all
eligible plan participants would be able to receive full pension benefits at an earlier
age than previously. Second, it could increase the cost of funding the plan, because
full benefits would be payable at a younger age.
Rather than reduce the normal retirement age in their pension plans, some
employers would prefer that Congress amend the Internal Revenue Code to allow in-
service pension distributions to employees who have reached the plan’s early
retirement age (or some age between the early retirement age and 62).10 Some
observers believe, however, that such a policy would be contrary to the main purpose
of pension plans, which is to replace wage income during retirement. If employers
were permitted to pay pension benefits to individuals still engaged in gainful
employment, the benefits would become a tax-subsidized supplement to wages.
Permitting in-service distributions to current employees who have not reached age
62 or the plan’s normal retirement age might allow employers to compensate current
employees with pension funds, effectively reducing their operating expenses by
shifting some costs to the pension fund that would otherwise be paid as wages.
7 In a “tax-qualified” plan, employer contributions to the plan are deductible business
expenses for the firm and neither the employer contributions nor investment earnings on
those contributions are counted as income to the employee in the years that they occur;
instead, pensions are taxed as income when the benefits are paid to plan participants in
retirement. Usually, retirees are taxed at a lower marginal tax rate than when they worked.
8 If a plan participant continues to work for an employer beyond the plan’s normal
retirement age, the plan must meet the statutory requirements for continued benefit accruals;
see 26 U.S.C. § 411(b)(1)(H).
9 Vivian Fields and Robert Hutchens, “Regulatory Obstacles to Phased Retirement in the
For-Profit Sector” Benefits Quarterly, volume 18 (3), Third Quarter 2002.
10 Requirements for qualification of pension plans are defined at 26 U.S.C. § 401(a).

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CRS-16
Amending the Internal Revenue Code to permit in-service distributions at the
early retirement age would alter incentives to work or retire, as well as how much to
work and for whom to work. Consequently, it would affect both labor force
participation and hours worked among older employees. The net effect of these
changes in labor force participation and hours worked would be almost impossible
to predict. Some workers who otherwise would have fully retired before the plan’s
normal retirement age would choose instead to continue working for their current
employer on a reduced schedule, because they would be able to take partial pension
distributions while still employed. This would tend to increase labor force
participation. Other workers who would have taken early retirement and then sought
other employment might choose instead to remain with their current employer on a
reduced schedule. The effect of this change in behavior on hours worked might be
close to neutral, depending on the wages available from alternative employment and
the income received from pension distributions. Finally, some employees who
otherwise would have chosen to continue working until reaching the plan’s normal
retirement age might instead reduce their work schedule and supplement their
earnings with partial distributions from the retirement plan. This would tend to
reduce total hours worked.
Distributions from 401(k) Plans
In-service distributions from defined contribution plans that occur before the
participant reaches age 59½ are subject to a 10% tax penalty in addition to ordinary
income taxes. Distributions may begin as early as age 55, however, if the employee
separates from his employer under an early retirement plan. Some advocates of
phased retirement arrangements have suggested that the minimum age for in-service
distributions from defined contribution plans should be lowered from 59½ to 55.11
The effect on labor force participation of such a change in tax policy would likely
be very similar to the effect of allowing in-service distributions from a defined
benefit plan at the plan’s early retirement age. Some workers who might have fully
retired from the labor force earlier than age 59½ so that they could begin taking
distributions from the plan would be induced to work longer. Others who would have
taken early retirement and then sought work elsewhere would remain with their
current employers, because they would be able to combine wages from part-time
work with distributions from the retirement plan. Finally, some employees who
otherwise would have chosen to continue working until age 59½ or later would
reduce their work schedules and supplement their earnings with distributions from
the retirement plan.
11 It might also seem reasonable that if legislation were passed to allow in-service
distributions from an employer’s defined benefit plan at the plan’s early retirement age, then
distributions from the employer’s defined contribution plan should be permitted at the same
age (perhaps with a lower limit of 55). However, such a policy would suffer from at least
two drawbacks. First, the minimum age for in-service distributions from defined
contribution plans, which is now the same for all such plans, would differ from firm to firm,
thus making the retirement planning process even more confusing for workers and their
families. Second, it would be administratively difficult — and in some cases, perhaps,
impossible — to tie the minimum age for in-service distributions in the defined contribution
plan to the early retirement age specified in the employer’s defined benefit plan.

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