What Is Forced Retirement?

Forced retirement is the involuntary job termination of an older worker. An older worker may lose a job as part of a wider company downsizing or may retire early due to poor health or disability.

Key Takeaways

  • The federal Age Discrimination in Employment Act prohibits terminating an employee due to age.
  • Nevertheless, one study shows that 56% of workers over age 50 have been pushed out of jobs before they would willingly have retired.
  • Some employers offer severance packages to older workers to get their agreement to retire earlier than planned.

Mandatory retirement due to age is prohibited by U.S. law in most cases. In the real world, the statistics show a different story. A 2018 study by ProPublica and the Urban Institute concludes that 56% of workers over age 50 have been pushed out of jobs before they would willingly have retired. Only one in 10 of them ever gets another job that pays as well.

Understanding Forced Retirement

When most people consider retirement, they assume that they will be able to choose when they leave their jobs, usually when they have reached a certain age and have accumulated enough savings to live comfortably. With life spans growing longer, many imagine starting a new phase of their lives.

Forced retirement removes the element of choice.

The Law on Forced Retirement

Mandatory retirement at a set age was abolished in 1986 by an amendment to the federal Age Discrimination in Employment Act. There are some exceptions for occupations that have high physical fitness requirements, such as military personnel and airline pilots.

The real world is murkier, though, especially since older employees tend to be better-paid employees. Companies that want to downsize without layoffs sometimes offer their most senior employees an early retirement package. Older employers caught in a round of job cuts sometimes get additional benefits in their severance packages, such as continuing health insurance coverage. In the corporate world, companies sometimes offer older workers attractive incentives to accept early retirement.

Forced Retirement Realities

The average American retires at age 62. That is the age at which Americans can choose to begin receiving Social Security benefits, although full benefits are paid only to those who wait until they reach age 66 to begin collecting.

However, the trend is moving in the opposite direction. Government statistics indicate that 19% of Americans aged 65 and over are still working, part-time or full-time. That is the highest level in more than 55 years.

What to Do If You're Being Forced to Retire

The American Society of Actuaries advises workers who are being forced to retire to consult a lawyer before signing any documents or waivers offered by their employers. The conditions may be negotiable. For example, the employer may agree to cover health insurance costs if the employee has not reached the Medicare-eligible age of 65.

19%

The percentage of Americans aged 65 and over who are still working, part-time or full-time.

An employee of any age who is laid off may be eligible for unemployment Insurance benefits that replace a portion of lost wages, generally for up to 26 weeks.

Early retirees who have reached age 59½ can withdraw money from IRA or 401(k) accounts without owing a 10% early withdrawal penalty, although ordinary income taxes will be owed on the withdrawals.