No “honeymoon phase”: whose health benefits from retirement and when

Does retirement lead to a short, transitory health boost, followed by a stable longer-run effect? The short-run effect has been hypothesized to be a kind of honeymoon effect, that is followed by a longer-run effect that may be either positive or negative. We examine the time path of the health effect of retirement and study effect heterogeneities between individuals along several dimensions. Moreover, we study a broad range of health outcomes, all in order to come to an understanding of the effect patterns that lie behind the diverse findings reported in previous research. For identification we use a fixed effects instrumental variable approach in which the normal and early retirement age thresholds serve as instruments. Using data for 10 countries from the Survey of Health, Retirement and Ageing in Europe (SHARE), we find that retiring both at the normal and early retirement eligibility ages significantly improves all the health aspects we consider. Other than hypothesized, results do not show a honeymoon phase-like transitory health boost. Instead, especially blue-collar workers go through an adjustment period after retiring, in which their health worsens. Afterwards, health stabilizes and improves, so that retirement has a health preserving effect in the longer run. This beneficial health effect of retirement occurs across all occupational groups, across a range of health outcomes, and for both sexes, though there are a number of heterogeneities between groups regarding which health outcomes are particularly affected.