Human Resource Depts. Force More Out Before Retirement Age
If you live in the United States, a culture which plays-up diversity in the workforce, nearly one quarter of older professional workers are forced out of the job market by corporate human resource departments.
With such a discriminatory environment the new economic game in the United States, Sun Life Financial urges all workers older than 40-years-old to prepare for forced early retirement. Not only are many older workers financially unprepared for retirement, but a recent survey by Sun Life Financial found 22 percent of all retirees are forced into retirement several years before they had anticipated. As corporations, such as IBM and other Fortune 100 companies, attempt to boost stock prices through mass layoffs the trend will affect more professional workers in the coming decade.
The forced retirements have not only left retirees well short of their financial goals, but 69 percent of respondents stated their overall retirement plans have been affected either a great deal or somewhat, requiring them to reduce expenses and change their lifestyles to adjust to their new status. Moreover, 55 percent of all respondents also say they were ineligible for Social Security benefits when they were forced to leave the workforce.
“Not only are Americans not saving enough for their planned retirement, but our survey found that more than one-in-five will retire an average of eight years before they expected,” said Mary Fay, vice president of annuities of Sun Life Assurance Company of Canada (United States.) “Pre-retirees and Baby Boomers need to re-evaluate their retirement plans and prepare a contingency plan in case they are forced to undergo an unplanned retirement.”
For those forced into retirement the response was highest for those under 55 years old, with 77 percent stating their retirement plans were impacted “a great deal” (57 percent) or “somewhat” (20 percent.) Those with assets of less than $250,000 also said the forced retirement affected their plans “a great deal” (42 percent) or “somewhat” (34 percent.)
Slightly older respondents aged 55-64 were also affected by forced retirement, with 39 percent stating their retirement plans were affected “somewhat” and 33 percent claiming they were impacted “a great deal.” Seventy percent of the mass affluent, with liquid assets between $250,000 and $750,000, also said their retirement plans were affected.
Respondents forced into retirement reported having to make numerous lifestyle and financial adjustments to address the shortfall in anticipated earnings. These include reducing expenses, skipping vacation destinations, collecting Social Security before they planned, and using money from a 401(k) or IRA before they had planned.
Healthcare insurance for themselves and/or their spouses was most cited as the financial obligation to be currently addressed beyond normal living expenses, with 53 percent of respondents aged 65 and older citing this obligation as most pressing.
The leading causes of forced retirement were corporate layoffs or downsizing (44 percent,) personal illness (32 percent,) and injury (14 percent.)
Respondents 65 years old and older were more likely to cite layoff (58 percent) as the primary reason for having to retire earlier than planned, while respondents under age 55 were more likely to name illness (46 percent.)
Of those surveyed, the average expected retirement age was approximately 64 regardless of respondent’s current age, and respondents were forced to retire on average approximately eight years earlier than expected.
However, large differences exist between those who were prepared and unprepared for retirement. On average, those who were financially prepared for retirement when they were forced to leave work had expected to work for another 4.9 years, while those who were financially unprepared for retirement expected to be employed for another 11.4 years.
The average respondent planned on accumulating approximately $1 million in retirement savings, but had accumulated only about half of that amount when they were forced to retire. The gap was most prevalent with respondents under the age of 55, who expected to retire with an average of $1.4 million in savings but only had $314,000 when forced into retirement.
“It appears that unanticipated, forced retirement is occurring at an alarming rate, leaving the impacted retirees unprepared,” said Fay. “The survey findings reinforce the importance of pre-retirees to reassess their long-term financial plans and work with a financial advisor to prepare a ‘rainy day’ scenario to ensure they are protected in case the unexpected occurs.”
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