The Effects of Retirement on Physical and Mental Health Outcomes

Posted: 16 Jun 2007

See all articles by Dhaval Dave

Dhaval Dave

Bentley University - Department of Economics; National Bureau of Economic Research (NBER) - NY Office

Inas Kelly

National Bureau of Economic Research; Loyola Marymount University

Jasmina Spasojevic

Trinity College (Hartford CT); Metropolitan College of New York - School for Public Affairs and Administration

Multiple version iconThere are 3 versions of this paper

Date Written: June 2007

Abstract

While numerous studies have examined how health affects retirement behavior, few have analyzed the impact of retirement on subsequent health outcomes. This study estimates the effects of retirement on health status as measured by indicators of physical and functional limitations, illness conditions, and depression. The empirics are based on six longitudinal waves of the Health and Retirement Study, spanning 1992 through 2003. To account for biases due to unobserved selection and endogeneity, panel data methodologies are used. These are augmented by counterfactual and specification checks to gauge the robustness and plausibility of the estimates. Results indicate that complete retirement leads to a 23-29 percent increase in difficulties associated with mobility and daily activities, an eight percent increase in illness conditions, and an 11 percent decline in mental health, over an average post-retirement period of six years. Models indicate that the effects tend to operate through lifestyle changes including declines in physical activity and social interactions. The adverse health effects are mitigated if the individual is married and has social support, continues to engage in physical activity post-retirement, or continues to work part-time upon retirement. With an aging population choosing to retire at earlier ages, both Social Security and Medicare face considerable shortfalls. Eliminating the embedded incentives in Social Security and many private pension plans, which discourage work beyond some point, and enacting policies that prolong the retirement age may be desirable, ceteris paribus. Retiring at a later age may lessen or postpone poor health outcomes for older adults, raise well-being, and reduce the utilization of health care services, particularly acute care.

Keywords: retirement, health, physical, mental, activity, behaviors

JEL Classification: I1

Suggested Citation

Dave, Dhaval and Kelly, Inas and Spasojevic, Jasmina, The Effects of Retirement on Physical and Mental Health Outcomes (June 2007). iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN: https://ssrn.com/abstract=993584

Dhaval Dave (Contact Author)

Bentley University - Department of Economics ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

National Bureau of Economic Research (NBER) - NY Office

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New York, NY 10016-4309
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Inas Kelly

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Loyola Marymount University ( email )

7900 Loyola Boulevard
Los Angeles, CA 90045
United States

Jasmina Spasojevic

Trinity College (Hartford CT) ( email )

300 Summit Street
Hartford, CT 06106
United States

Metropolitan College of New York - School for Public Affairs and Administration ( email )

75 Varick Street
New York, NY 10013
United States

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