What’s mandatory retirement?

The average American worker expects to retire at 66. However, some workers may opt to leave the workforce voluntarily or they are forced out of their job due to various reasons like job loss, health complications, layoffs, etc. If you are being forced out of retirement, you should know what to expect from your employer.

Mandatory retirement, also known as forced retirement, is the age when workers may be forced to leave employment or retire. It also refers to the involuntary job termination of an older worker due to poor health, disability, or as part of the company downsizing. However, the Age Discrimination in Employment (ADEA) prohibits employers from terminating employees based on age.

Is mandatory retirement legal?

Mandatory retirement at a set age was abolished in 1986 through the Age Discrimination in Employment Act (ADEA). The Equal Employment Opportunity Commission (EEOC) is responsible for administering ADEA. The law protects workers who are age 40 or older from workplace discrimination. It prevents employers from making hiring and firing decisions based on the worker’s age.

However, in the real world, statistics show that workers are being tossed out of their jobs before they could willingly retire. A report by ProPublica in 2018 shows that at least 50% of older workers over 50 are pushed out of their jobs before they chose to retire. Older workers who have been on their jobs for a long time are better paid and may be offered an early retirement package when the employer is downsizing.

Older employers caught up in layoffs may also receive additional benefits like severance packages and extended health insurance.

Age Discrimination in Employment Act (ADEA) Explained

ADEA was introduced in 1967 to protect older workers above age 40 from workplace discrimination. It prohibits employers from making hiring, firing, and retiring decisions based on the employee’s age. For older workers, the law minimizes the damaging effects of long-term unemployment that they would be subjected to due to forced retirement.

ADEA applies to both private and public employers with more than 20 workers. It promotes the employability of older workers based on their skills and ability, rather than age. It also protects workers from being forced to sign legal waivers that give up their right to sue. If you have been discriminated against based on age, you must file a complaint with the EEOC to receive a Notice of Right to Sue before filing a case against your employer.

Can you be forced into retirement?

The Age Discrimination in Employment Act makes it illegal for employers to adopt a mandatory retirement age for employees, apart from a few occupations that require high physical fitness like military and airline pilots. The decision to retire should be the prerogative of the employee, and they should have the right to continue working until when they opt for voluntary retirement.

If you are being forced to retire based on age, you should consult a lawyer before signing any waivers provided by the employer. A lawyer can help you interpret the terms of the waiver to know what you are getting in exchange for agreeing to early retirement. In some cases, the employer may offer a severance package and extended health insurance for employees below 65 in addition to the early retirement package.

Can you work after mandatory retirement?

If you have been forced into early retirement by your employer, you can still find a job and continue working as much as you like. As long as you are in good shape and you love your job, most employers are willing to hire experienced employees.

Once you find a job post-retirement, you can continue working without impacting your social security benefits. However, if you are above 70, you should seek tax advice to know the tax implications of the work arrangement on your social security income and mandatory retirement distributions.

What to do when facing mandatory retirement

If you are being forced out of your job due to advanced age, here are things you can do to prepare for the future:

Tap into 401(k)

If you are being forced into retirement, and you don’t have enough money to meet your immediate expenses, you can tap into your 401(k) account. If you are above 59 ½, you can take penalty-free distributions from your 401(k). You will still owe taxes at your tax bracket rate. If the 401(k) was a Roth, you can take tax-free and penalty-free distributions once you are 59 ½. 

Delay taking social security

Depending on your year of birth, you may be allowed to start taking social security benefits starting from age 66 to 67. If you are below this age, you should delay taking social security benefits until you have attained the full retirement age. Taking social security benefits before you have attained the full retirement age would result in reduced benefits, even after you have reached the full retirement age.