Mandatory Retirement: What You Need to Know

Retirement means different things to different people. For some it might mean a complete release from any work responsibilities or requirements and the start of a life of leisure. For others it may be more of a side-step into work they’ve always wanted to do, or the chance to start a business. But retirement comes when the worker wants to stop working, with exceptions made for pilots, air traffic controllers and, in some states, judges. Other employees aren’t told when to stop.

“All U.S. employers with at least 20 employees are prohibited from taking adverse employment action based on age against most employees 40 years older or older,” says labor and employment lawyer Scott Horton. “In many states, age discrimination laws cover even more employers and employees. These laws essentially make it illegal to have a mandatory retirement age, even if someone could make a good business case.”

Here’s what you need to know about the concept of mandatory retirement.

Arguments on Mandatory Retirement

Mandatory retirement would give a clearer idea of the size of the available workforce, making planning easier. “Internal labor markets are based on paying low wages to new entrants and then higher wages to older workers as firm-specific skills are acquired,” says Mitchell Langbert, who teaches human resources at Brooklyn College’s business school. Allowing older workers to be paid at rates that don’t match their productivity makes labor too costly, he says. “Of course, other factors also contribute to the demise of internal labor markets, but optimal HR policies can’t evolve when rigidities like illegalization of mandatory retirement are introduced.”

On the other hand, some argue that retirement should only be driven by skills or abilities.“If a truck driver reaches 67 and can still pass all the health and vision tests, why force him to retire?” says Laura Handrick, an HR analyst at FitSmallBusiness, which provides information on how to build and run businesses. “A gymnast might need to retire at age 28, a football player at 42 or a pilot at 65, but it’s not the government’s business to mandate that limit.”

What Might It Look Like?

If the government did implement mandatory retirement, employers would have several options, experts say. They might offer a cash benefit payout tied to skills rather than age, for example, Handrick says. And a mandatory retirement age could do away with age-discrimination lawsuits, making it more likely for employers to hire older workers without fear of retaliation when they let them go.

Mandatory or not, Handrick recommends people focus on their own retirement plans. She recommends employees plan for an income to support themselves at age 67, after Social Security kicks in, if not before.

Likelihood of Change

At this point mandatory retirement isn’t a large political issue, and employers aren’t necessarily pushing for it. Talking about options can help policymakers and employers alike think about different options, but it would likely come down to what the general public would support.

“It is hard to imagine a viable amendment to the Age Discrimination in Employment Act that would permit mandatory retirement in the foreseeable future,” Horton says. “Even if alternative financial compensation were provided, most Americans today would likely reject the prospect of telling older workers they cannot have a job.”

One Comment:

  1. Mandatory retirement is a huge inconvenience for those who have yet to plan and save for the future. Many find it impossible to begin saving until later in life. While mandatory retirement may create new job opportunities for the younger generations, older employees have knowledge and insight that many companies can tap into. At the end, there should be a balance between new and experienced workers in the workforce.

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