Is early retirement bad for you?
While that’s a crucial question all of us face, it takes on a special urgency for adherents of the Financial Independence/Retire Early (FIRE) movement. After all, if retirement is bad for our health, then we ought to postpone it as long as possible.
Several recent studies are shedding new light on this urgent question, so let’s take a look.
One relevant study was published this summer. Entitled “Early-life predictors of retirement decisions and postretirement health,” its authors are Matthew Iveson and Ian Deary, both members of The University of Edinburgh Centre for Cognitive Ageing and Cognitive Epidemiology. The authors were able to analyze the health and retirement outcomes for a group of 742 Scottish individuals who were born in 1936. This group had been first analyzed in 1947 by other researchers, with follow-up studies periodically conducted ever since—giving the authors of this new study access to an enormous trove of data covering everything from social class, intelligence, and education, to career, earnings, and the circumstances leading up to retirement.
Armed with this data, the authors were able to search for what in these individuals’ younger years was correlated with poor retirement health. In contrast to some previous studies, they found that the age of retirement was not a factor. One of the factors that did have the greatest correlation with poor retirement health was whether the retirement was involuntary—being let go, in other words.
This is good news for those FIRE followers pursuing an early retirement, since their retirement would be voluntary.
There’s more to this story, however. Consider another recent study: “The Retirement Mortality Puzzle: Evidence from a Regression Discontinuity Design,” by Matthias Giesecke, a researcher at RWI Essen, an economic research institute in Essen, Germany. He analyzed a database from the German Social Security system that also contained numerous data points for each participant. He found that, in some circumstances, retirement leads to an increase in mortality while, in other circumstances, it can lead to an increase.
This helps to explain why previous studies have reached such disparate conclusions about whether early retirement is good or bad for your health.
In what circumstances is retirement good for health, and when is it bad? Giesecke summarizes his finds as following: “I conclude that retiring from bad jobs with low earnings or hazardous work conditions tends to be health-improving while retiring from good jobs with high earnings and more prestigious occupations is dominated by adverse health effects.”
In other words, if you loved your job and then lost your sense of purpose upon retiring, retirement is not likely to be good for your overall health. However, if you had a bad job with poor earnings, retirement would be a good thing.
Notice the tension between the results of the Scottish study and this German one, however. It would appear that it’s important not just whether retirement is voluntary or involuntary, but the kind of job one has before retirement.
There’s an even bigger tension between these two studies and another one from a couple of years ago, however. In March 2018, you may recall, I devoted a Retirement Weekly column to this study that found that earlier retirement actually leads to an increase in mortality.
The authors of that study focused on changes to the Social Security rules that were implemented in the late 1950s that made it possible to begin receiving Social Security benefits as early as age 62. (Prior to those changes, you had to wait until age 65.) The authors found a significant jump in mortality among 62-year-old men at the same time of the change to the Social Security rules.
Since deciding to claim Social Security at age 62 is a voluntary move, it’s hard to square this result with the results of the Scottish study. And it’s also hard to square it with the conclusions of the German study, since those deciding to claim Social Security at age 62 tended to be those who had bad jobs with lower earnings—the very group that the Germany study found to have improved health upon retiring.
For insight, I reached out to Maria Fitzpatrick, a professor in Cornell University’s Department of Policy and Management, and co-author of that earlier study to which I devoted that March 2018 Retirement Weekly column. In an email, she argued that it’s not as surprising as it might otherwise appear that these other two studies reached different conclusions. She pointed out that both of those studies deal with the populations of different countries than the U.S., and there may very well be cultural differences at work. Furthermore, the Scottish study focuses on a relatively small sample, making it difficult to detect the patterns that emerged from her analysis of a much larger number of retirees.
Nevertheless, she added, “it is probably the case that the relationship between retirement and health is complex and plays out differently for different people with different circumstances. It’s important for people to pay attention to the possible effects of retirement on their health, but it’s by no means a foregone conclusion that it will have either a positive or negative effect.”