The Creation of Social Security and Other “Old People” Programs

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By Bill Koch, editor

Part 2 in a continuing series

By Bill Koch

The early years of the 20th century brought some interesting – but not especially hopeful – opportunities to older folks looking for some rest and relaxation in their golden years.

Although the concept of retirement – and retirement communities – seemed strange, even unworldly, an increasing number of older workers found themselves contemplating the principle, if only out of necessity.

If you were 65 and were still alive in 1900, you were probably still working. In fact, nearly two-thirds of seniors were still working at the turn of the 19th century.

Rewind the clock by a half century to 1850, and more than three quarters of those creaky-jointed creatures were still gainfully employed. You simply didn’t have much of a choice.

That percentage today is below 17 percent.

If you made it through deadly childhood diseases and illnesses (and many in times past did not), you had a good chance of making it to your golden years. But retiring? That was another story.

The average retirement age in 1910 was 74, which meant you just might be able to enjoy the early 20th century’s version of pickle ball and water aerobics. Retirement in its early years might be sitting on the porch or making sure you stay out of the way of the whippersnappers.

If you happened to be one of the fortunate few who did retire prior to the advent of Social Security, you had to have developed some very innovate ways to generate ongoing income.

A handful of newly created company pensions made life relatively easy for a very small percentage of the elderly in those years. The Alfred Dolge Company started pensions in 1882.

Government workers also might look forward to pensions, although few states provided this benefit until the 1930s. By 1935, 30 states had established pension systems, but only 3 percent of the elderly were receiving benefits.

Some industrious and forward-thinking Americans in the early decades of the 20th centuries looked to banks as a venue for generating steady income streams in the form of interest on savings accounts. Of course, putting your money in the bank wasn’t always the safest investment; FDIC insurance wasn’t established until 1933.

Those “good, ole” days when everyone was above average may not have led to the best wealth management solutions. Cash was king for most Americans before Social Security – and the high-tech security and convenience of today. Cash-stuffed mattresses served as one of the more popular financial strategies of the day; banks were generally viewed with suspicion.

Annuities seemed a very novel and lucrative approach to retirement funding in the late decades of the 19th century and well into the 20th century. As families began to shrink in size, the idea of annuities to fund the golden years began to increase in popularity.

Some wounded Civil War combat soldiers were able to collect benefits, but the number of recipients began to diminish significantly as veterans died.

Previously, many of the elderly had few, if any, financial options; communities throughout the 18th and 19th centuries established poor houses, many of them with very substandard provisions designed to discourage people from becoming poor.

The retirement reality prior to Social Security and investment savings was rather stark or out of reach for most. Nearly half of seniors were poverty stricken. With little subsistence, few had any options except to continue working or go the way of the ancient ancestral retirees, the hole in the ground.

While family sizes were beginning to shrink in the early part of the 20th century, many older folks relied on the charity of extended families and children.

As the ravages of the Great Depression escalated, many of the elderly were increasingly compelled to remain or return to work – and often in positions that required less vigor. However, as the job market continued to wither, finding or retaining gainful employment became extremely difficult.

Higher mortality rates among older people painted a very grave picture for the future and quality of life for yesteryear’s retiree.

President Franklin D. Roosevelt signed the Social Security Act into law on Aug. 14, 1935, hoping to assuage the hardships of America’s elderly.

The act provided funding to states for older poor people. It also provided benefits to retired workers. American workers began accruing Social Security benefits on Jan. 1, 1937.

Read next week’s article on the evolution and development of Social Security.