The relationship between retirement and health

Since World War II, retirement has gone from a fringe to a mass phenomenon in western countries. Many people long for the day when they don’t have to toil away and instead enjoy uninterrupted leisure. No more job stress, no more problems. Who could argue against that dream? However, it is also suggested that people need to work longer to ensure sustainable pension systems. Won’t this have the effect of reducing health among the elderly?

Although this sounds like a plausible scenario, it is far from clear. Whether people have fewer or more incentives to invest in their health after retirement depends on whether the marginal benefit of better health is higher or lower compared to before, and there is no straightforward answer to this question. And while retirement may decrease work related stress, it is in itself a very stressful event, as people go abruptly from working full time to not working at all. Similarly, people might lose their social networks from their jobs, thus spurring loneliness that may result in deteriorating mental health, but people may also have more time to pursue voluntary networks outside of work when they’ve retired. In terms of physical exercise, people may exercise less following retirement, if their exercise was mainly linked to their work, or more, if they now use their leisure for this purpose. One effect that is pretty clear-cut, however, is that retirement in most cases produces a drop in income – which may very well have a negative impact on health. Overall, however, the theoretical relationship between retirement and health is ambiguous.

The existing empirical literature on the subject is also mixed, with some studies finding positive, some negative, and some null effects. But it is also the case that many of these studies (1) suffer from methodological problems, and/or (2) do not separate the short-term from the long-term impact of retirement. In the beginning, retirement may very well be positive for health, perhaps because of the spike in leisure time and perhaps because people have invested in their health in anticipation for retirement. Yet the negative effects may still emerge after some time.

In my paper, I attempt to account for the problems in previous research in order to analyse the impact of health on retirement among 7,000-9,000 people across 11 European countries. I find consistently large negative effects on self-assessed health, mental health, and physical health. However, these negative effects only emerge after a couple of years. In the short run, there is either no impact or actually some evidence of a positive effect on health. When the honeymoon period is over, however, the negative effects are significant indeed.

In other words, my study gives support to the argument that retirement actually reduces health, both physical and mental. Consequently, policies that induce people to work longer, such as increased state pension ages, may not only produce sustainable pension systems, but also lower health care costs and raise health levels among the elderly. Win, win, win.

Gabriel H. Sahlgren is the author of Work Longer, Live Healthier: The relationship between economic activity, health and government policy

Research Fellow

Gabriel H. Sahlgren joined the IEA in January 2012 as Research Fellow. Having been active at several European and US think tanks, Gabriel is the author of the paper ‘Schooling for Money: Swedish Education Reform and the Role of the Profit Motive’, which received the Arthur Seldon Award for Excellence in 2011. He holds a BA in Politics from the University of Cambridge.

5 thoughts on “The relationship between retirement and health”

  1. Posted 21/05/2013 at 19:46 | Permalink

    A personal comment regarding the above. I am 70. I officially retired at 53 – with a pension. Following retirement I sought other work, believing that an idle lifestyle might be detrimental to good health. I worked at new jobs, unrelated to my previous work. After five years, I moved from my home to a small town far away and opened a Bed and Breakfast business with my wife. We have been at it for 12 years.
    Looking back, two things have contributed positively to my well-being. Experiencing something very new and different and working. So far so good.

  2. Posted 22/05/2013 at 13:07 | Permalink

    This sounds like another attempt to con the working population working longer to keep the bankers and other parasites in the manner to which they’ve become accustomed. I gave up work 11 years ago (at 55) and I’ve never regretted it for one moment. You can never be too young to retire, only too poor.

  3. Posted 23/05/2013 at 08:46 | Permalink

    I am about to retire and was worried reading the report. Then I looked at the web page heading:
    “The IEA continues to show the vitality and relevance of free market economics.” – David Willetts MP”
    Would you really expect anything else from this type of “objective” analysis?
    A search for IEA on wikipedia makes also interesting reading.

  4. Posted 25/05/2013 at 16:44 | Permalink

    I retired at 55. I am now nearly 65. I have never been happier. This paper is nonsense.

  5. Posted 16/06/2013 at 06:55 | Permalink

    I was made redundant following a takeover in my mid 50’s. At first I found alternative employment as I was concerned about my financial future, but non of these jobs were really satisfying and I realised that if I took my pension early I didn’t really need to work. (my wife also had a reasonable pension). We retired and moved to France where at the time houses were half the price of those in the UK. Since then we have been so busy with restoring the house, maintaining a large garden, learning the language, and our other hobbies that I often wonder how I ever found time to go to work. My conclusion is that what is important to maintain one’s health after retirement is to have enough activities, both physical and mental to completely fill your time. Only if you retirement is followed by an empty life will you have poorer health and mental depression.

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