Having to deal with forced early retirement isn't something anyone thinks about, let alone prepares for. Instead of those final years of saving, you’re suddenly scrambling to figure out what you’re going to do next.
Coping with forced early retirement requires you to refocus and readjust your plans short and long-term. Adapting to this new reality may take a full rework of your initial plan.
You could find you didn’t take something into consideration or one you did, is no longer necessary.
What is Forced Early Retirement?
Forced early retirement is the involuntary loss of employment of an older worker. This can be driven by the employer or due to health issues. In either situation, it’s not the worker’s desired choice to retire.
According to a 2018 survey by ProPublica and the Urban Institute, over half (56%) of workers over the age of 50 have been forced out of jobs they wouldn’t have otherwise left. Statistically, only one in ten ever finds employment with comparable pay.
In addition, their job searches tend to be much longer. As the weeks and months drag by, both their morale and savings are decimated. Those final years of preparation and savings are crucial.
Almost half of all Americans (45%) have no retirement savings whatsoever! Our post, baby boomer retirement facts, documents the many hard realities facing our generation. The COVID-19 pandemic further heightened this trend.
The Economic Policy Institute reported 5.7 million workers 55 and older lost their jobs in the spring of 2020. The majority of these jobs haven’t been replaced.
These discouraging facts highlight the problem and the need of addressing coping with forced early retirement.
1. Financially Surviving Those First Months
Once the initial shock wears off, it becomes critical to figure out how you’re going to survive without a paycheck. In a perfect world, everyone would have an emergency fund and other savings they could tap into.
As most folks have a rather limited reserve, it’s important to understand other ways to augment their income. Your employer might provide a separation agreement and you’re likely entitled to unemployment insurance.
Voluntary Separation Packages
Separation packages can be voluntary or provided after the fact. Some companies might choose to incent certain older employees with a voluntary package to leave.
This could include financial incentives, extended benefits and other desirables. Some of the terms might even be negotiable.
If you’re offered a voluntary separation package, this is something you should consider as the organization might be targeting you.
I recall a co-worker who turned down a generous package which included 18 months of his salary plus numerous benefits. He chose to decline as he wanted to work a few more years and assumed it would be offered again.
His working conditions declined and it wasn’t long before he regretted his decision. Within two years, he chose to retire with no additional incentive.
Involuntary Separation Packages
In other situations, workers are downsized and receive the company’s standard separation agreement. This will, at least, meet the minimum labor law requirements and is intended to prevent any legal matters of wrongful dismissal.
This is something you’ll want to thoroughly evaluate before signing. Based on your situation, this might even warrant legal counsel.
Further to this, if you had a stellar employment history, you might have a strong case of wrongful dismissal. Many companies prefer to settle out of court and you might be entitled to much more than their standard package.
After years of contributing to unemployment insurance, this isn’t something you want to overlook. Depending upon your final payout, you might be eligible to receive benefits right away.
Regardless, you’ll want to submit your paperwork in a timely fashion. Not filing until you run out of your separation incentives delays the whole process when you’ll need the money the most.
Each state has their own program and slightly different rules. The Department of Labor offers a listing of the unemployment centers for each state.
2. Take The Time to Recover Emotionally
Even if you saw it coming, coping with forced early retirement is going to take time. This can be an unsettling time as you’re probably upset, confused and concerned about what the future looks like. This isn’t the time to make any major life decisions.
After addressing your short-term financial needs, take the time you need to let everything settle. My wife, for the first time since a child, took the entire summer off.
She was emotionally devastated with several health issues she’d ignored. She expands upon this in her post, should you retire from a toxic work environment.
Further to this, our post, how to deal with forced retirement, takes a deeper look into the emotional turmoil associated with job loss.
The Road to Recovery
Wallowing in self-misery is probably the worst thing possible. Understandably, it’s completely normal and healthy to grieve your loss. At some point, you need to let it go and start moving forward.
There are three steps to regaining a sense of normalcy. These include:
3. Can You Afford to Retire?
The greatest retirement concern is fear of outliving your savings! A sudden unexpected departure from the workplace means losing those crucial final years. Even for those who’ve financially prepared, the looming question remains, did I save enough?
You’ll want to seriously consider your financial position. This requires determining your projected expenses and how much you’ll need to be comfortable. Our post, how to write a retirement plan, goes into more detail on how to document this.
In addition, there are numerous retirement calculators which can help unravel things. Finance isn’t the average person’s strong suit.
If you’re not sure, this might also be a good time to consult with a financial expert to gain their professional insights.
How Much Do You Really Need?
This becomes the million-dollar question, and for some, even that won’t be enough!
As a general rule, you should save 80% of your pre-retirement income to have enough to last throughout your retirement. With the average American household earning $60,000, this would translate to $48,000 annually.
Factoring in 20 to 30 years of retirement, this would be well over a million dollars. Clearly this is unrealistic for most households.
In our post, how much to save for retirement, we took a stab at the absolute minimum amount the average couple might get away with.
Based on the following factors, we determined they would require $430,000:
There’re many unknowns which can and will affect things. The markets could slide, inflation spikes upward or healthcare costs spiral out of control. If you’re not feeling financially prepared, you might want to consider working a few more years.
4. Re-Entering The Workforce
Working provides many benefits in addition to a paycheck. These include having something to do each day, the social interaction and even a sense of belonging.
Some folks, as we discuss in why you should never retire, have no desire to ever fully retire. As strange as this might sound, there’s usually a reason why things happen.
For instance, if my wife had continued working, her health would have likely continued to have deteriorate. Until there was irreparable damage such as a stroke or worse.
From another perspective, this might be the opportunity to find something you really enjoy.
Continuing Your Career
Continuing in your field of expertise or a related one, might be your best course of action. You’re highly competent with years of experience. Not to mention all the training and certifications you may’ve acquired.
There is new evidence revealing a shortage of skilled workers. We discuss in our post baby boomers are retiring faster than ever before how, for the first time, organizations are struggling to replace us.
In fact, many new opportunities are opening up with flexible hours or contract positions. Our post, bullet proof your career and avoid forced retirement, delves into the importance of keeping your expertise current, networking and providing value.
Getting the perfect job will likely require a focused effort. This could include:
A totally different option is getting a part-time job which is fun and interesting. This might be one which taps into an interest of yours and is low stress. One example could be becoming a tour guide and sharing your knowledge and stories with others.
As another thought, you might enjoy electronics and technology. It’d be kind of neat to be a sales person showing customers the latest TVs, stereos or computers.
If you’re financially secure, a part-time position will provide a little extra spending money. More importantly, hopefully it’s something you enjoy and look forward to.
Other perks could include social interaction and having something to look forward to. Some of these jobs might even include healthcare coverage.
Many retirees downsize their homes to something smaller and easier to manage. This has the added benefit of reducing the costs of maintenance and repair. Equally important, this can free up locked-in home equity.
Or, if there’s an outstanding mortgage, downsizing can reduce or eliminate debt. Where to downsize might pose the greatest challenge. You might desire remaining in the same area or relocate far away.
This could be to a different city, a retirement community or becoming an ex-pat. Any of these options could potentially reduce expenses.
Relocating To Reduce Cost of Living
Depending on where you reside, relocating has the potential to reduce your cost of living. You might also choose to be closer to family or move to a warmer climate. Our post, where to live in retirement, discusses these options.
If you prefer your current area, a smaller home or condo might make the most sense. A little more drastic may be moving to another state.
Finally, you might choose to pick up and move to a whole new country. There’re lots of ex-pats out there living in Panama, Costa Rica, Belize, Spain, etc.
Doing your research on the various states, cities, towns and countries is highly recommended. Our post, retirement location criteria, goes over all the factors you should take into consideration when making this decision.
There’re tons of retirement communities and companies are trying to convince you to buy into. They offer various options and amenities which might suit your way of life.
If you’re looking to be around people that are similar to you in age, lifestyle, etc. this might be the place for you.
Our friends moved into a retirement community and love it. They’re traveling with their new friends and joining walking groups. For them, it was the right move.
6. Health Care Options
Declining health can also be a big factor. Whether yourself or a loved one, it may not be a viable option to continue working. In addition, employer driven job termination is often associated with age.
The bottom line, they don’t want to have to shell out long-term benefits for older employees. They’re deemed at higher risk and could, potentially, die.
Anyone coping with forced early retirement is likely under 65 and not eligible for Medicare. Health care insurance is expensive and should be considered a necessary evil.
There’s a lot of options ranging from maintaining your current coverage through COBRA to a host of other insurance providers. If your spouse is still working, you might be eligible to be added on their benefit plan.
The most important thing is not to let your health care insurance lapse.
Medical expenses can add up quickly. It’s estimated the average married couple will spend $285,000 during their retired years. So, having supplemental insurance would be a definite benefit in keeping some of these costs in check.
Look around at several providers and make sure you’re aware of all the subtleties of the plan. You’ll want to look for things such as:
Our post, reduce healthcare costs in retirement, offers more thoughts and ideas on the subject.
7. Moving Forward and Embracing Life
Forced early retirement can be a blessing in disguise. Especially when you’re ready to leave and your employer sweetens the deal. Otherwise, you might’ve stayed longer than you should, to the detriment of your health and happiness.
Now’s the time to follow your passion and pursue dreams you’ve put on hold. Also, you can work on improving your overall well-being. You’re still young enough to enjoy retirement.
So, you want to make sure your body and mind are up for the task. Our post, why retirement is great, goes into greater detail.
Exercise, catch up on all that sleep you’ve been missing and always keep learning. All these things help keep you active and sharp, both, physically and mentally. Re-establish important relationships.
You’ll want to renew any passions you may’ve had earlier in life. Did you always want to be an artist? Now would be the time to pursue it. Or find something different and exciting that intrigues you.
In our post, finding meaning in life after 65, we focus on a couple of success stories of people finding their true passion after retiring.
Closing Thoughts on Coping with Forced Early Retirement
Being forced to retire can be a very traumatic event in one’s life. It’s as if the rug gets pulled out from under you. A lot of people, with good reason, tend to panic. This is a major life event which almost no one prepares for.
Yet, over half of the population report not making it to their planned retirement date. Even the best laid plans sometimes go sideways. This doesn’t need to be a “doomsday” outcome.
By carefully reviewing your options and what needs to be done, you’ll greatly improve the chances of everything working out. Things may not be perfect, but they may not be as bad as you first think.
Readjust your sails, critically go over everything and go confidently move forward. Enjoy your retirement. After all, you’ve earned it!