What would happen if a 63-year-old worker is fired shortly after informing their employer of their intention to retire? This is what happened to a 63-year-old worker, who now faces the question: is what the company did to him legal? Reports from Yahoo Moneywise state that most of the United States follows at-will employment, meaning that workers can be fired by companies without having to be given a reason.
However, federal ERISA rules (Employee Retirement Income Security Act) protect against age-related dismissals or dismissals intended to prevent pension benefits. The two federal laws that protect workers in this situation are the Age Discrimination in Employment Act (ADEA), which prevents dismissals based on age, and the Employee Retirement Income Security Act (ERISA), which prohibits dismissals to maintain a worker’s pension benefits. This worker will have to show evidence that their retirement plans were a determining factor in their dismissal. If they succeed, the company could face legal consequences.
Illegal dismissal?
A 63-year-old worker finds himself in a delicate situation: his company dismissed him right after he had informed them of his retirement plans. He wonders whether the company has committed an illegal dismissal or if it is within its rights to let him go. The truth is that, according to reports from Moneywise by Yahoo, the employment model followed by most companies in the United States is at-will employment, which does not require companies to give a reason for dismissing workers.
However, there are federal laws that protect workers if the reason for dismissal is related to their age or the cost of their pension plan. According to experts, “firing someone because of their age or to avoid granting them a pension is against the law.” The two federal laws that protect workers in these cases are:
- The Age Discrimination in Employment Act (ADEA): Prohibits employment actions based on age.
- The Employee Retirement Income Security Act (ERISA): Prohibits employers from firing a worker to preserve their pension benefits.
The key and determining factor for this worker is the evidence. “If the employee can show that any of the reasons played a role, the company could face legal consequences,” experts say.
Early Retirement
It is common practice for companies to encourage workers to take early retirement by offering severance packages. However, advisors recommend seeking guidance and negotiating knowledgeably since “separation agreements often include clauses that waive the right to sue”. As they point out, “a financial advisor can determine if someone is truly ready to retire or needs to adjust their plan”.
They recommend the use of platforms like Advisor.com, which allow users to “compare advisor profiles, read reviews, and schedule an initial consultation without any obligation to hire”. Workers cannot overlook healthcare costs, which for a 65-year-old American is typically $165,000 according to Fidelity estimates, 2024. They should keep in mind that employer-based coverage through COBRA will be higher since the employer stops paying their share. It is recommended to make use of services like U65 Health Insurance to compare insurers and ‘review the Medicare options and the changes coming in 2025″.
What should be done in the event of a sudden job loss?
According to experts, it is advisable to have an emergency fund capable of covering expenses for 12 to 18 months. They also refer to gold IRAs as an alternative option. According to attorney Marty Burbank, “An emergency fund provides stability when health problems arise, home repairs are needed, or the market drops. Retirees cannot predict all future expenses, but that cushion allows them to enjoy retirement with greater peace of mind”.