The standard retirement age is rising in many European countries. Early retirement programs are fading due to weaker pension system sustainability, caused in part by more inactive retirees. There are growing concerns regarding people’s health that may have to work longer than expected. Postponing retirement may not boost welfare if it improves health.
This is debatable
Recent reviews by Van der Heide et al. (2013) and Nishimura et al. summarise contradictory empirical findings (2018). The estimating procedure determines these discrepancies.
- Uncovering retirement’s influence on health is difficult. Reverse causation is a challenge for this study (for example, people in poor health may be more likely to retire at an earlier stage).
- Unobserved factors can potentially skew outcomes.
- Personal preferences for leisure time may affect retirement and health, confounding causality.
- Individual fixed effects can solve the problem with longitudinal datasets.
- Reverse causation or time-varying heterogeneity, such as changes in grandparenthood or family conditions, are not addressed.
- Instrumental variables (IV) and regression discontinuity design are employed to overcome these difficulties (RDD). Eligibility ages for early retirement or retirement-related social security benefits are attractive variables for the IV approach.
- The RDD method uses the abrupt increase in retirement likelihood when a person reaches pension eligibility age.
Multi-country studies use cross-country differences in pension retirement ages as exogenous information to explain retirement decisions (for an overview of the recent literature on the health effects of retirement, see van ours 2019). And this research is done by our assignment editing help expert, Eddie Broke.
Research studies: Overview
Mental health seems to be most affected by retirement. Thus most studies focus on that. Physical health changes slowly after retirement. Our study (Picchio and Van Ours 2019) focused on retirement’s mental health impacts. We use data from the Netherlands to reveal the incidental influence of retirement on mental health. Two considerations make the Netherlands a good case study. Early retirement programs are disappearing, and older workers have high employment rates.
The Dutch normally retire when they become eligible for the state pension, which has risen from 65 in 2013 to 66 and 4 months at writing. Many workers retire at the state pension age, whether they want to. Many collective labor agreements say workers lose their jobs at age 65. When persons reach the state pension eligibility age, the pension data jumps suddenly. In this study, we leverage this substantial discontinuity to instrument the retirement decision and solve for its endogeneity.
Our study investigates partner spillover effects. We study whether one partner’s retirement can affect the mental health of the other, in addition to the retiree’s welfare. We focus on gender and marital status to measure both paired and single retirees’ mental health.
Our study used CentERdata of Tilburg University’s LISS panel for empirical analysis. Statistics Netherlands drew the sample from the population register. Demographics, family composition, education, labor market position, retirement status, and incomes are measured monthly, beginning in November 2007. We use monthly data to determine a person’s age (in months), retirement status, and eligibility for the state pension. We consider someone retired if her principal occupation is ‘pensioner.’
Our dataset includes characteristics describing mental health from multiple angles. Mental Health Inventory helps us focus on mental health (1991). We also look at happiness, peacefulness, anxiety, despair, and feeling down to complete the picture. Retirement affects self-perceived health, too. We assess retirement’s consequences by gender and, for couples, on both partners’ and retirees’ health.
Retirement and mental health
When males retire, both the retiree and his partner’s mental health improve greatly. Retirees and their partners have a 25% greater chance of being mentally healthy. A woman’s retirement has no impact on her mental health or her spouse’s. Focusing on mental health components like depression or feeling down yields comparable results. Retiring seems to have fewer mental health effects for coupled women. This may be due to women’s ‘net drop’ in working hours. This change is far larger for retired males than women, amplifying its impact.
Comparable to partnered women’s retirement consequences. Single men’s outcomes differ from paired men’s and women’s. Single males who retire had a 40 percent reduction in mental health and self-perception. Leisure time and loneliness study add clarity. The data imply that contentment with leisure time increases across the board, but loneliness increases for single retirees and decreases for coupled retirees. Increasing the state pension age may improve the health and happiness of single employees by preventing loneliness from becoming a mental health issue. And you can also read about why you should plan for retirement.
Retirement consequences vary by gender and marital status, making it hard to draw standard policy implications. Single men’s mental health often suffers. Many collective labor agreements do not consider this heterogeneity, dictating that workers terminate their job at the state pension age. By examining mental health wellbeing and the heterogeneous effects of retirement on self-assessed health, we suggest that greater general flexibility in the retirement process would improve welfare.
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