A new study from Deakin University and French economists has found increasing the retirement age could leave workers more vulnerable to unexpected health shocks with negative consequences.
The study reveals that postponing pension access also could delay the beneficial effects of retirement on people’s health, regardless of other factors such as worker occupation or marital status.
Dr Cahit Guven, a behavioural economist within the Deakin Business School, collaborated with the Paris School of Economics’ Professor Bénédicte Apouey and Professor Claudia Senik on the study.
Dr Guven said while retirement was sometimes thought to lead to a loss of purpose and lack of socialisation, workers still generally planned to retire as soon as they are entitled to receive full pension benefits, and the positive health impact of leaving the workforce was now clear.
“Men especially are more likely to believe that their health will deteriorate once they retire, but our study shows retirement actually comes with unexpected improvements in general, physical, and mental health,” he said.
“We found that men and women are up to around 24 per cent less likely to experience unexpected bad health after retirement.
“Conversely, men and women are up to around 14 per cent more likely to experience good health unexpectedly after retirement, compared to beforehand.”
In Australia, the pension eligibility age is currently at least 65 years and six months. That figure will be incrementally raised to 67 years by 1 July 2023.
Dr Guven and his colleagues compiled their study using extensive data from the Household, Income and Labour Dynamics in Australia survey 2001 to 2014, covering 51,000 observations and more than 1600 transitions to retirement.
He said the results showed representatives should think twice before raising the retirement age. Recent changes to pension eligibility have spurred protest movements and arrests in the UK, Belgium and Russia.
“Many developed countries have recently increased pension eligibility age, leading to massive protests,” he said.
“Our paper implies that even if such reforms seem necessary, they may postpone the beneficial effects that retirement has on people’s health. Policymakers should take this factor into account when deciding whether or not there should be compulsory or voluntary retirement and whether or not we should increase the official retirement age.”
“By making people work even longer into their old age, you could be increasing their likelihood of poor health, and denying them the health benefits and higher level of life satisfaction that retirement brings,” Dr Guven said.
The full findings “Retirement and Unexpected Health Shocks” have been accepted for publication in the Economics & Human Biology journal, and are now available online.