Forced into retirement during COVID-19
November 25, 2020
The COVID-19 pandemic has wreaked havoc on the American economy, forcing companies across the country to grapple with the pandemic’s financial fallout. Some used tactics like reducing employee hours or furloughing employees, but many had to terminate workers. The Pew Foundation published a survey in late September that revealed 25 percent of US households reported someone in that household had lost a job, and half of adults who reported job loss had not yet found a new one. With jobs at a premium and financial pressure increasing, it’s no surprise that forcing or encouraging employees to retire early is on the agenda for many businesses.
Channel 3000 in Madison recently reported that as many as 4 million Americans between ages 55 and 70 could be forced to retire due to COVID-19. To avoid mass lay-offs, offering early retirement packages to employees has become a trend, according to WREX-Rockford. It cites American Airlines’ offer of early retirement packages as one example.
Central Wisconsin resident Judy Hansen (not her real name) was forced to retire in late July at age 59. Hansen returned from a brief trip to a phone call from her supervisor telling her the company had terminated her management position. She’d been working there for over 30 years.
Rather than simply terminating Hansen’s employment, the company did offer her options. She was welcome to apply for another position, but that may have required moving to another state—something someone within five years of retiring was loathe to do. Or Hansen could claim unemployment payments and within 6 months officially retire from the company.
Hansen chose option 2. “I wanted to go out with my head held high,” she said.
Despite the many press reports of difficulty applying for unemployment compensation, Hansen said she hasn’t experienced any problems collecting or applying for it herself. Normally, she’d have to apply for jobs every week to receive the benefit, but due to the pandemic, Wisconsin has waived that requirement until early February.
Although upset at the termination of her position, Hansen had been mentally preparing for it. “When I turned 50, I knew the clock was ticking,” she said.
Since she carried the benefits for her family, there was initial worry about health care since her husband was already retired but neither was old enough for Medicare benefits. The company offered to extend her benefits for 6 months, when her retirement benefits package would kick in.
Unlike Hansen though, many retirees have been caught unaware and unprepared for retirement. They counted on amping up their savings before retiring and supplementing that with Social Security benefits.
“A lot of people are in a very different situation than what they thought they might be in 6 months ago,” Savant Wealth Management financial advisor Jeff Lewis told WREX. He advised people take a deep breath, don’t make decisions out of emotions, and make an action plan. If health care is a major concern, negotiate with your employer for extended benefits.
Channel 3000 advised 4 steps for those whose jobs might be at risk:
- Continue investing if possible.
- Try to save 3 to 6 months’ of expenses if you can. Avoid withdrawing from your retirement plan if at all possible.
- Pick up a “side hustle” to help you pad your savings.
- Consider claiming Social Security benefits as soon as you turn 62. Your monthly payments will be smaller than if you’d applied for the benefits later, but applying now might help you make ends meet.
Despite the unwelcome news Hansen received in July, she’s making the best of her unexpected situation. She’s grateful to have been offered retirement instead of being terminated.
“I’m kicking back and enjoying my time,” she said. “I could have been bitter, but then I didn’t want that in my heart or thoughts. I’m taking this as a good thing.”