Also known as involuntary retirement, forced retirement is a situation in which an employee is no longer active with an employer due to circumstances beyond the control or the consent of that employee. The reasons for this type of employment situation may have to do with cutbacks in the employer’s work force that result in terminations or layoffs, an accident that results in a disability preventing the employee from continuing with the job, or the development of health issues that make working impractical. Forced retirement can be devastating to the employee, since it typically means a sudden reduction in household income, and also has an adverse impact on future contributions to pensions and other types of retirement programs.
With forced retirement, the employee has no choice but to leave the employer prior to the normal retirement age. Depending on the circumstances, this can mean loss of a number of benefits. In addition to no longer being able to contribute to the employer based pension plan, the employee may have to pay additional premiums to continue access to health insurance benefits. In most cases, the sudden reduction in income will also mean that the household budget must be adjusted to meet the new circumstances.
The difficulties experienced as the result of forced retirement will vary, based on the timing of the action. If the employee is within a year or two of the traditional retirement age, the impact on the defined contribution plan for the company pension may not be affected to any great degree. In addition, the mandatory retirement with one employer does not necessarily mean that the individual cannot seek employment elsewhere. This is particularly true for people who lose jobs due to employer reductions, or people who are able to pursue some other line of work as independent contractors, in spite of any health issues that may exist.
While forced retirement is rarely considered a positive event, the key to moving forward involves carefully assessing other alternatives and identifying the opportunities that are likely to allow the individual a chance to maintain an equitable standard of living. The scope of these opportunities will depend greatly on the age at which the forced retirement took place, any physical limitations that the employee may have to deal with, and the skill set that the employee can use to attract other employers or use in creating some sort of self-employment strategy. Many people who are displaced due to situations beyond their control can go on to create new options that are ultimately just as fulfilling and lucrative as the jobs that were lost.
