(This article appeared previously on MarketWatch.)
Retirement, contrary to popular opinion, is not the time in which your satisfaction with life declines and your health deteriorates. Instead, it’s the exact opposite: Retirement is likely to improve your overall happiness and health, according to a working paper just published by the National Bureau of Economic Research.
Looking at the correlation between people’s health and retirement status can give a misleading picture.
— Aspen Gorry, study author
And that improvement happens immediately, according to the authors of the paper Aspen Gorry and Devon Gorry, both professors at Utah State University, and Sita Slavov, a professor at George Mason University.
But is it so obvious that retiring is better than working and that you start to feel happier and healthier as soon as you retire?
Health and Happiness Improve
Gorry answered our questions about the study, its implications and what those planning for retirement should take away from the study.
MarketWatch: What were the study’s goals?
Gorry: We wanted to study the effect of retirement on people’s well being and health as well as their health-care utilization. This question is really difficult to assess in the data because when people are faced with poor health, they often retire. Thus, looking at the raw correlation between people’s health and retirement status can give a misleading picture. If unhealthy or unhappy people are more likely to retire it will appear that retirement is bad for health and happiness. We wanted to know the causal effect of retirement on these outcomes.
Beyond the importance to individuals as they make retirement decisions, the answers to these questions are also important for policy as countries decide whether to extend Social Security eligibility ages since health-care costs are often paid by the government.
Can you describe your findings?
Gorry: We find that retirement improves both happiness and health. We find that life satisfaction improves immediately upon retirement and these effects are long-lasting. While we don’t find immediate effects on measurable health outcomes, we do find positive health impacts four or more years beyond retirement. This finding is consistent with the idea that health changes slowly over time so that retirement can have long-run health benefits. We find no effect of retirement on health care utilization.
Positive Effects are Immediate and Long-Lasting
What surprised you most about the findings?
Gorry: We were surprised that the positive impact of retirement on reported well being was long lasting, as many life events have been found to have only short-run effects that fade over time. Past studies also haven’t found measurable health impacts of retirement so the fact that there are long-run health benefits is a new finding. We believe that this finding is the result of data that covers a longer time period. Finally, our findings suggest that these health benefits are not the result of increased health care utilization as most measures of utilization are not affected by retirement.
What findings were expected?
Gorry: We were not surprised to find that retirement led to an immediate increase in life satisfaction as previous research has found that people are happier after they retire.
What are the implications for those saving for retirement?
Gorry: I think a lot of people look forward to retirement, and our study suggests that, on average, people are happier in retirement and some health limitations improve. It appears to be a good period in life.
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