Mandatory Retirement Is Illegal for Most American Workers
Under the Age Discrimination in Employment Act (ADEA), mandatory retirement based solely on age is illegal for most employees. The ADEA protects workers aged 40 and older from age-based discrimination in various employment aspects. Generally, performance, not age, should dictate employment decisions, meaning your employer cannot force you to retire at 70 just because of your age.
What the ADEA prohibits
The ADEA prohibits employers with 20 or more employees from actions like establishing a mandatory retirement age for most positions, harassing older employees to encourage leaving, reducing responsibilities, or giving unfair negative performance reviews based on age.
Exceptions to the General Rule
While the ADEA provides broad protection, there are specific, limited exceptions where mandatory retirement is allowed. These typically do not apply to the average worker and include:
- High-level executives: Certain executives or high-level policymakers receiving substantial retirement benefits may be subject to mandatory retirement at age 65.
- Certain public safety roles: Some jobs requiring significant physical demands or having critical safety components, such as police officers, firefighters, and air traffic controllers, may have mandatory retirement ages. These require specific justifications.
- Commercial pilots: The FAA sets mandatory retirement for commercial pilots.
The Financial Implications of Working Past Age 70
Working beyond age 70 has notable financial implications, particularly regarding Social Security benefits and retirement account withdrawals.
Social Security benefits and delayed credits
Delaying Social Security claims until age 70 is a strategy to maximize your monthly benefit. Your benefit increases each month you delay claiming past your full retirement age, up to age 70. After age 70, no additional delayed retirement credits are earned, although benefits can still increase if current high earnings replace lower past earnings.
Required Minimum Distributions (RMDs)
Recent legislation has shifted the age for starting Required Minimum Distributions (RMDs) from most retirement accounts. The RMD age is currently 73 and will rise to 75 in 2033. If you continue working and don't own 5% or more of your company, you can often delay RMDs from your current employer's retirement plan until you retire. However, RMDs from IRAs and other plans follow the standard age rules regardless of employment.
Comparison: Retiring at Full Retirement Age vs. Age 70
Here's a comparison for an individual with a Full Retirement Age (FRA) of 67:
| Feature | Retiring at Full Retirement Age (67) | Retiring at Age 70 |
|---|---|---|
| Monthly Social Security | Receive 100% of your primary insurance amount (PIA). | Receive 124% of your PIA (due to delayed credits). |
| Retirement Savings | Must start drawing down savings at age 67 if you stop working. | Extra years to continue saving and allow existing investments to grow, potentially significantly increasing your nest egg. |
| Required Minimum Distributions | Will be required to start RMDs from your retirement accounts based on your age, which for many is now 73. | RMDs from your current employer’s 401(k) plan can be delayed until after you officially retire (for non-owners). |
| Employer Health Insurance | May need to transition to Medicare or another plan, with Medicare enrollment required at 65 to avoid penalties. | Potentially continue receiving employer-sponsored health coverage, which can save thousands before transitioning to Medicare. |
Conclusion: The Choice Is Yours
For most individuals, the answer to "Do you have to take retirement at 70?" is no. Federal law, specifically the ADEA, makes mandatory retirement illegal in the majority of cases, allowing the decision to retire to be a personal one based on financial and personal circumstances. Working longer can offer financial benefits, including maximizing Social Security benefits by delaying claims until 70 and allowing more time for retirement savings to grow. Continuing employer-sponsored health coverage can also be advantageous. However, it is important to be aware of the limited exceptions to mandatory retirement and to understand the rules regarding Social Security and Medicare. Being informed helps you make the best decision for your retirement timeline.
How to Plan to Work Past 70
If you plan to work past age 70, consider these steps:
- Social Security Review: While 70 is the optimal age to start benefits, continued high earnings can still increase payments. Review your earnings record.
- Coordinate Medicare and Employer Health Insurance: If you have employer coverage, understand how it works with Medicare to avoid penalties.
- Adjust Investment Strategy: Your longer time horizon may require rebalancing your investments.
- Update Estate Plan: Ensure your estate plan reflects your current situation.
- Create a Budget: Plan your finances to ensure your savings support your retirement goals.
- Consider Future Costs: Account for potential healthcare and long-term care expenses.
Working past 70 is a choice, not a requirement, and can positively impact your financial future with proper planning.
Understanding the Legal and Financial Factors
Working past age 70 involves considering legal rights, financial rules, and personal needs.
The Legal Landscape
The ADEA protects workers aged 40 and over from age discrimination in employment decisions.
The Social Security Factor
Delaying Social Security until age 70 provides the highest monthly benefit, with an 8% annual increase after your full retirement age. Claiming earlier results in a permanent reduction.
Retirement Account Management
Working longer allows more time for saving and investment growth. You may also be able to delay RMDs from your current employer's 401(k).
Healthcare Considerations
Medicare begins at 65, but employer coverage can affect enrollment decisions, making coordination important to avoid penalties.
Ultimately, with legal protections allowing you to work as long as you choose in most jobs, understanding the financial and legal aspects is key to a smooth transition into retirement whenever you decide to make it.
