Pros and Cons of Mandatory Retirement

by Eric Dontigney - Updated September 26, 2017
Senior woman celebrating start of retirement

Mandatory retirement calls for ending employment when a person reaches a particular age threshold, such as 65. While ostensibly an illegal practice for most professions, courtesy of amendments in 1978 and 1986 to the Age Discrimination in Employment Act, some companies still encourage workers to exit at a certain age. The idea of mandatory retirement offers pros and cons.

Opens Positions for Younger Workers

A mandatory retirement age ensures that at least some positions open up in a given profession on a predictable basis, allowing younger workers to enter as older workers exit. In higher education, for example, young professors often bring in new ways of thinking. If younger generations do not believe they can find work in an industry dominated by older professionals, they may choose to train in areas that offer a better chance of securing work after college or training.

Experience Drain

Forcing members of a profession to retire at a certain age creates an experience drain. The older members of a profession possess irreplaceable practical experience and insider knowledge about their work and industry, as well as highly developed professional networks. If forced to leave the industry at a specific age, their knowledge leaves with them.

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Less Costly

Older workers with extensive experience tend to command far higher salaries and better benefit packages than younger workers. Uncertain retirement ages coupled with contracted annual raises create perennial uncertainty about the size of budgets and fears of rising salary costs. A firm retirement age allows businesses to plan for periodic payroll reductions as older workers exit on schedule and less expensive younger workers receive promotions.

Insufficient Resources for Retirement

Not all employees demonstrate equivalent skill in planning for retirement. While a future-minded young employee might persistently choose to contribute to a retirement plan, many neglect to plan or find it financially impossible to begin saving until later in life. Mandating a retirement age effectively cuts off earning power, regardless of employee’s financial preparedness to retire. The general collapse of employer pension plans and of lifelong employment with a single company exacerbates this problem.

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