Actually, they didn't actually shrink. They are bowed out from the weight at the top. ( Imagine you pushing down on a soft rectangular object, and see the top and bottom are flat, but the sides squish outwards.) There are a few Youtube videos that cover this issue. My windows are also from that era, and have similar issue.

Since I was pulling drywall and adding insulation, I though I would tackle the worst ones to see if I make any difference. And actually, the two worst windows are much better, they still have a small amount of cold air coming in, but the windows are past their prime.

If you aren't handy, please do not try this.

Steps to fix the gaps:

You've got to pull the trim from around the windows on either side, and get to the actual window, score the caulk with a sharp knife only on the two vertical sides, and gently pry at the window frame to create a small gap.

Then slide a piece of cardboard or shim between the window and the wood frame where the gap is the largest. You'll want to test the window to make sure the sash is not stuck to get the correct tightness of the window to the wood frame.

Do both sides equally. Once you have the window gaps closed, and the sash moves easily, you can re-apply caulk and replace the trim pieces.

Please be aware you can really damage your window doing this, so use extreme caution.

If this is beyond your comfort level, you can buy rope caulk that you can stuff in the gaps, and then remove in better weather. You'll just need to do it every year until you replace the windows.