Forced Retirement

DEFINITION of 'Forced Retirement'

The involuntary ending of one's career because of a layoff, health problems or disability. Forced retirement can have a significant negative effect on workers' retirement plans if they are unable to earn several years' worth of income that they anticipated and/or they are forced to take Social Security benefits early. However, just because a worker is forced to retire from one company does not mean she can't seek employment with a different company or pursue self-employment.

BREAKING DOWN 'Forced Retirement'

When most people think of retirement, they think of choosing when they will leave their jobs - usually when they have reached a certain age or accumulated enough savings to live off of comfortably for the rest of their lives. Forced retirement removes this choice from people and can be disruptive to future plans. Sometimes companies that downsize will offer employees who are close to retirement age an early retirement package. This is basically a severance package by another name. In some cases, these may be employees who would have been fired no matter what because of poor performance; in other cases, companies may want to cut older workers because they tend to have higher salaries than younger workers.