How Does Delayed Retirement Affect Mortality and Health?

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Older Americans have been retiring later for a number of reasons, including jobs that are becoming less physically demanding, the shift from defined benefit to defined contribution pensions, and changes in Social Security’s incentives. What are the implications of working longer for workers’ mortality and health? Answering this question is complicated, because work and health are jointly determined – healthy people with lower mortality tend to work longer. Previous studies looking at the causal effect of work on mortality and health have found mixed results and have tended to focus on the effects of early retirement, not delayed retirement. A simple assumption would be that the relationship between them is symmetric. But it is unclear that that assumption is correct – after all, people who decide to keep working are likely a healthier group than those who stop early. This paper uses administrative data from the Netherlands and exploits policy variation designed to delay retirement to explore the links between work and health outcomes.

The paper found that:

  • Working longer is associated with lower mortality, depression, and diabetes risk for both men and women in ordinary linear regression models.
  • In an instrumental variable approach that takes into account the joint relationship between work and mortality, delayed retirement reduces the 5-year mortality rate for men ages 62-65 by 2.4 percentage points, or a 32-percent reduction relative to non-workers.
  • However, the same analysis finds no significant relationship between delayed retirement and the health conditions studied.
  • The effect on male life expectancy depends on how permanent the effect is.  A 32-percent reduction in mortality increases age-60 life expectancy by about three months if the effect applies only to the ages studied, but longer if the effect is permanent.
  • For women, the weakness of the instrument variable results in insignificant results.

The policy implications of the findings are:

  • Policies that delay retirement may increase longevity, especially for men, but have no detectable effect on depression or diabetes during one’s 60s.
  • As they consider policies that could lengthen careers, policymakers could take into account the possibility that lives may also be extended, and consider the potential effects on the benefits paid out.