Definition of Forced Retirement
What is a "forced retirement"? What is the definition of the term "forced retirement"?
A "forced retirement" occurs when a worker who is near retirement age is forced to leave the workforce earlier than they had originally expected.
A "forced retirement" can occur for a number of reasons, including poor health or layoffs.
Let's take Joe. Joe is a 62 year old factory worker who plans on retiring at the age of 65.
The factory that Joe works at needs to cut back due to the recession. Joe's performance has been dwindling as of late thanks to his declining health, so the factory decides to give Joe an "early retirement" package which he is forced to take.
This "early retirement" package is the same as a severance package, but with a different name.
Now, Joe doesn't have to retire - he could go work somewhere else if he wanted to. However, with Joe's high age and declining health, he will be hard-pressed to find employment somewhere else. For this reason, Joe has been forced into retirement earlier than he would have wanted.
"Early retirement" sounds great, but Joe is going to have to adjust his retirement plans and start drawing on his retirement savings/old age benefits early. This could cause a problem for Joe down the road.
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