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Last week, NFL fans watching the Baltimore Ravens take on the Miami Dolphins were reminded of the unforgiving nature of football as Tua Tagovailoa, the Dolphins’ 24-year-old star quarterback, suffered what appeared to be a severe concussion during the game’s first half.

The injury came less than a week after Tagovailoa appeared to have suffered another significant concussion, this one in a game against the Buffalo Bills. Tagovailoa, after undergoing the NFL’s standard concussion screening protocol, reentered and finished the game against the Bills.

The unfortunate chain of events has resulted in calls from concerned neurologists, journalists and fans of the sport for Tagovailoa to consider an early retirement from the game of football — or at least to take a significant time away for recovery.

For financial advisors, Tagovailoa’s struggles with head injuries and the calls for him to consider an early retirement may call to mind an uncomfortable truth about their own clients, and indeed their own careers: Not everyone gets to retire on their own terms.

Whether one is a star professional football player, a newly tenured university professor or a mid-career technology executive, the possibility of forced retirement is one that must be reckoned with.

Fortunately, advisors and their clients can work together to prepare for such disruptive scenarios and increase the likelihood that a forced stoppage of work, whether due to a health issue or a simple layoff, does not spell financial disaster.

Here are some key insights — and some uncomfortable truths — about unexpected terminations, older workers’ job prospects, and early retirements. Though unexpected late-career terminations are always disruptive, with the right planning in place, they don’t have to be catastrophic.

1. Claims of Age Discrimination in Hiring and Firing Remain Pervasive

Broadly speaking, the federal Age Discrimination in Employment Act (ADEA) forbids age discrimination in hiring and firing against people 40 or older. The law also applies to pay determinations, job assignments, promotions, layoffs, training, benefits and any other term or condition of employment.

Under the ADEA, it is unlawful to discriminate because of age with respect to any term, condition or privilege of employment. Harassing an older worker because of age is equally prohibited, and it is also unlawful to retaliate against an individual for opposing employment practices that discriminate based on age.

Despite these strict rules, data from the Equal Employment Opportunity Commission shows Americans continue to file a substantial number of age discrimination lawsuits each year.

Notably, the pace of age discrimination claims grew significantly during the Great Recession period, increasing from 16,585 total claims in 2005 to a peak of 24,582 in 2008, after which the total began to decline slowly year over year. In 2021, Americans filed just shy of 13,000 age discrimination in employment claims.

The prospect of another potentially painful recessionary period may increase the likelihood of both fair and unfair layoffs among older workers, many of whom have suffered significant losses in retirement accounts and personal savings due to the market volatility of 2022.

(Image: Adobe Stock)

2. The COVID-19 Pandemic Sped Up Older Workers’ Departures

Data from the Bureau of Labor Statistics show that more adults age 65 and older left the labor force in 2020 than in any year since the U.S. began tracking such information in 1948, and the rate of exits has remained elevated over pre-pandemic levels.

According to an analysis published last year by the Urban Institute, many of these older Americans will likely never work again, jeopardizing their immediate and long-term financial security.

The Urban Institute noted that efforts to make the workplace safer during the pandemic, to better prepare older workers for today’s economy, and to root out ageism could help the older adults who want to work remain employed.

A report from the Employee Benefit Research Institute paints a similar picture, finding the COVID-19 era has already affected elderly American adults’ work and financial situations to a large extent. Despite the clear impact, the retirement expectations of these respondents seem to have remained unchanged.

EBRI finds there is generally an upward trend among elderly American adults to expect a later and later retirement age, despite the fact that the opposite seems to be happening in practice. That is, elderly American adults have not adjusted their retirement expectations significantly, including planned retirement age and Social Security benefit claiming age, despite many survey respondents indicating that the COVID-19 pandemic had negatively impacted their work and financial situations.

(Image: Adobe Stock)

3. Improvements in ‘Work Longevity’ May Have Stalled

Many workers assume that they will be able to work well into their 60s and 70s because of broad improvements in health and life expectancy enjoyed by Americans in recent decades.

However, as highlighted in a recent report from the Center for Retirement Research (CRR) at Boston College, studies suggest this progress has stalled. According to the CRR, while the percentage of men and women with a work-limiting disability declined between 1980 and 2005, the percentages held relatively steady between 2006 and 2018.

Moreover, estimates of health-life expectancy at age 50 — which combines the disability rate with changes in life expectancy — showed actual declines for lower-educated white workers and lower-educated Black men.

Hence, the CRR concludes, the broad desire among individuals to work longer is unlikely to actually move the average retirement age in the coming decades.

(Image: Shutterstock)

4. Workers Remain Unrealistic in Their Contingency Plans

Related research from the Insured Retirement Institute shows that Americans have inflated retirement income expectations, setting them up for even more pain in the case of forced early retirement.

Overall, 70% of workers expect that they will not only have adequate income for basic expenses during retirement, but will also have discretionary income for travel and leisure activities.

According to the IRI, it is highly unlikely that more than half of workers will be able to subsist on Social Security, particularly if they retire before full retirement age, as so many plan to do.

Survey participants may also be unrealistic in their contingency plans if they exhaust savings.

The IRI’s data suggests 62% of workers believe they can downsize and get by on Social Security if they exhaust their savings early during retirement. Thirty-eight percent say they plan to return to work if they run out of money during retirement, despite the fact that many people in those straits may not possess either the marketable skills or good health necessary to return to work.

Also problematic, four in 10 IRI survey respondents believe that Medicare will cover their health care needs, ignoring the fact that they may still face significant out-of-pocket costs for medical care. Moreover, Medicare does not cover long-term care.

(Image: Adobe Stock)

Gig Work and Partial Retirement Are Potential Solutions

According to the 2022 Natixis Global Retirement Index report, for many individuals globally, the traditional view of retirement is fading, such that many continue to work in some capacity well beyond the traditional retirement age.

Natixis’ own survey data shows that, even as they plan to retire at age 62 on average, six in 10 U.S. workers believe they will have to work longer than they anticipated.

Specifically, the number of people age 65 and older still working is expected to grow from 24% of men and 16% of women in 2018 to 26% and 18%, respectively, in 2026.

According to Natixis, for many in the U.S., working in the flexible gig economy may provide an opportunity to augment their income beyond Social Security and savings. In fact, 44% of workers aged 55 to 64 and 37% of those age 65 and older say they are interested in gig economy jobs for extra money and flexibility.

As ThinkAdvisor has previously reported, early retirement can mean different things to different people. It can mean retiring “cold turkey” from any sort of paid work. It can also mean phasing out of a position, perhaps scaling back to part-time work with an employer for a few years prior to moving to full retirement.

(Image: Adobe Stock)


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