The Impact of Voluntary and Involuntary Retirement on Mental Health: Evidence from Older Irish Adults

We investigate the impact of retirement on mental health as measured by the 20-item Center for Epidemiological Studies Depression Scale, using data from the first two waves of The Irish Longitudinal Study on Ageing. To deal with possible endogeneity problems, we use first-differenced estimation models and control for transition to retirement and for a broad range of life events occurring between the two waves. As reasons for retirement are asked, we exploit this information and distinguish between individuals who retired voluntarily, involuntarily or because of own ill health. We find that involuntary, or forced, retirement has a negative and significant effect on mental health. This effect seems to diminish with time. Negative mental health effects of voluntary retirement are also found but these are smaller in magnitude and insignificant in some specifications. The finding that reasons for retirement are an important determinant of mental health in retirement is a clear addition to the literature.

Background: The few studies that have attempted to identify the causal effects of retirement on mental health and well-being have provided conflicting evidence. Hence, whether retirement affects mental health positively or negatively is still unclear.

Aims of the Study: Our primary objective is to investigate the impact of retirement on mental health as measured by the 20-item Center for Epidemiological Studies Depression Scale (CES-D).

Methods: We use data from the first two waves of The Irish Longitudinal Study on Ageing (TILDA). This is a nationally representative sample of individuals aged 50 and over and living in Ireland. To deal with possible endogeneity problems, we use first-differenced estimation models and control for a broad range of life events occurring between the two waves. These include transition to retirement but also demographic, social, economic and physical health events. As part of the TILDA survey, reasons for retirement are asked. We exploit this information and distinguish between individuals who retired voluntarily, involuntarily or because of own ill health.

Results: We find that involuntary, or forced, retirement has a negative and statistically significant effect on mental health. In the case of voluntary retirement, negative mental health effects are also found but the magnitude is smaller and the effects are not statistically significant in all models. We also find that retirement due to poor ill health is negatively associated with mental health. These negative effects seem to diminish with time.

Discussion: The finding of differences in the extent of mental health impacts across the various reasons for retirement is an important addition to the literature. While our estimation approach reduces potential endogeneity problems, time-variant unobservables are not removed through our first differencing approach.

Implications for Health Care Provision and Use: Individuals who are retiring involuntarily are more likely than others to be suffering depressive symptoms. Hence, they are more likely to present at GPs with such symptoms.

Implications for Health Policies: It would be preferable if involuntary retirement can be avoided. Transitions paths from work to retirement could help protect people's mental health.

Implications for Further Research: Reasons for retirement should now feature in analyses of this type.