Forced Retirement

What Is Forced Retirement?

Forced retirement is the involuntary job termination of an older worker. Generally, an older worker may lose a job as part of a wider company downsizing. People can also be pushed into retiring early due to poor health or disability.

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

Key Takeaways

  • The Age Discrimination in Employment Act (ADEA) 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.

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. Being forced to retire removes the element of choice.

Is Forced Retirement Legal?

Mandatory retirement at a set age was abolished in 1986 by an amendment to the federal Age Discrimination in Employment Act (ADEA). 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 as 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 employees caught in a round of job cuts may 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

Americans can choose to begin receiving Social Security benefits at age 62, although full benefits are paid only to those who wait until they reach anywhere between age 66 and 67 (depending on birth year) to begin collecting. So, it’s interesting that—according to March 2018 statistics from the Center for Retirement Research at Boston College—the average retirement age in the U.S. is 65 for men and 63 for women.

However, there's also data suggesting that people are staying in the workforce longer. The Pew Research Center said 66.9% of 65-to 74-year-olds were retired in the third quarter of 2021, meaning about one-third of this age group still considered themselves part of the labor force.

The U.S. Bureau of Labor, meanwhile, expects working in later life to become increasingly common. According to its estimates, nearly 40% of 65- to 69-year-olds will be in the labor force by 2030, up from 33% in 2020. The Bureau also predicted, in Nov. 2021, that 11.7% of people older than 75 will be working by 2030, up from 8.9% in 2020.

18%

The percentage of Americans age 65 and over who were still working in 2021.

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.

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. What's more, any person who has reached age 59½ can withdraw money from individual retirement accounts (IRAs) and 401(k) accounts without owing a 10% early-withdrawal penalty, although ordinary income taxes will be owed on the withdrawals.

Can You Be Forced into Retirement?

Aside from a few professions, it is illegal under the Age Discrimination in Employment Act (ADEA) for employers to adopt a mandatory retirement age. That means the decision to retire should usually be up to the employee. Sadly, it doesn’t always work out that way, though.

Why Do Companies Want Workers to Retire?

Generally speaking, older people tend to earn higher salaries, mainly because they’ve been in the job longer. They also may be less adaptable and in worse health than their younger peers. When companies look to cut back and save money, it is these kinds of people who could be first on the chopping block.

Can I Continue to Work After Retirement Age?

The law states that you can work for as long as you like. If you love your job, are in decent shape, and need the money, continuing to work probably makes sense. However, it might be wise to run your situation past an accountant or tax advisor first, particularly after you reach 70.

Article Sources
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  1. U.S. Equal Employment Opportunity Commission. "The Age Discrimination in Employment Act of 1967." Sec. 621 [Section 2]."

  2. ProPublica. "If You’re Over 50, Chances Are the Decision to Leave a Job Won’t Be Yours."

  3. U.S. Congress. "H.R.4154 - Age Discrimination in Employment Amendments of 1986."

  4. Social Security Administration. "Starting Your Retirement Benefits Early."

  5. Center for Retirement Research at Boston College. "Average Retirement Age for Men and Women."

  6. Pew Research Center. "Amid the Pandemic, a Rising Share of Older U.S. Adults Are Now Retired."

  7. U.S Bureau of Labor. "Projections Overview and Highlights, 2020–30."

  8. U.S. Bureau of Labor Statistics. "Number of People 75 and Older in the Labor Force Is Expected to Grow 96.5 Percent by 2030."

  9. U.S. Bureau of Labor Statistics. “Household Survey Data, 2021 Annual Averages,” Page 5.

  10. U.S. Department of Labor. "State Unemployment Insurance Benefits: Benefits."

  11. Internal Revenue Service. "Topic No. 558 Additional Tax on Early Distributions from Retirement Plans Other than IRAs."

  12. Internal Revenue Service. "What If I Withdraw Money From My IRA?"

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