بازنشستگی و سلامت روانی

The life cycle model predicts that individuals substitute leisure for consumption when they retire. We show that the effect of retirement on various well-being measures available in the German Socio-Economic Panel (GSOEP) are compatible with this prediction: the overall effect on life satisfaction is negligible, while satisfaction with the free time increases and satisfaction with household income decreases. The life cycle model also predicts that involuntary retirement is likely to have adverse effects because individuals would actually prefer to work in order to consume more, but are prevented from doing so. We find that indeed, involuntary retirement results in an overall negative effect that can partly be explained by a bigger drop in income satisfaction and a smaller increase in satisfaction with the free time.► We study the effect of retirement on life and domain satisfactions using panel data. ► The effect on satisfaction with free time is positive, the effect on satisfaction with household income is negative, and the overall effect of retirement is negligible. ► Involuntary retirement has an overall negative effect. Here, also theories in psychology play an important role in explaining this effect.

Retirement is a major event in life that affects the financial situation, the allocation of time, social relations, as well as physical and mental health. The life cycle model predicts that individuals optimally decrease their consumption level and compensate for this by engaging in more home production or substituting leisure for consumption. The extent to which they do this depends on their preferences. In this paper, we use well-being measures that are available in the German Socio-Economic Panel (GSOEP) and show that, compatible with this prediction, voluntary retirement has a negative effect on satisfaction with household income, a positive effect on satisfaction with the free time, a positive effect on satisfaction with health, and a small positive effect on life satisfaction.1 The life cycle model also predicts that they will not be able to fully compensate for the drop in the consumption level if they are forced to retire earlier than they had planned. This explains our finding of a negative overall effect of involuntary retirement. There are a number of studies that characterize the relationship between well-being and retirement, but none of them has investigated the effects on domain satisfaction at the same time, and none of them uses as long and as comprehensive panel data as we do. In those studies, it is typically emphasized that the retirement decision might be related to unobserved individual characteristics that by themselves are related to the level of subjective well-being. Usually, this is addressed by performing FE or FD estimation (for linear models), the inclusion of Mundlak (1978) regressors (for nonlinear models), or IV estimation that exploits exogenous variation in retirement incentives.2Lindeboom et al. (2002) perform FD estimation to investigate the effect of major events in life on mental health for a representative sample of individuals from the Netherlands and find insignificant effects of retiring. Clark and Fawaz (2009) use the Survey of Health, Ageing and Retirement in Europe (SHARE) and the British Household Panel Survey (BHPS) and show that on average psychological well-being barely changes when individuals retire. Charles (2004) uses HRS data with outcomes “being depressed” and “feeling lonely” as well as NLSMature Men data with outcome “subjective well-being” and finds a negative effect using the ordinary least squares (OLS) estimator, insignificant negative FE estimates, and positive IV estimates (some of these are significant). So, generally, effects are not found to be statistically different from zero.3 At least two studies characterize associated dynamics.4Kim and Moen (2002) find “higher morale” in the short run and more symptoms of depression in the long run. Börsch-Supan and Jürges (2009) find a strong association between early retirement and subjective well-being. Individuals are less happy in the years of early retirement than in the years before and after retirement. Unemployment is similar to involuntary retirement in that individuals are not working but actually want to. It is well established that being unemployed is associated with lower levels of satisfaction (e.g. Clark and Oswald, 1994). Clark et al. (2001) find that life satisfaction is lower for currently unemployed individuals and decreases in past unemployment. However, these findings could be explained by the presence of FE that are negatively related to the probability of being unemployed and positively related to life satisfaction. In fact, Winkelmann and Winkelmann (1998) reject a model without FE and find “large non-pecuniary costs of unemployment” when controlling for FE. Also Van Praag and Ferrer-i-Carbonell (2002) assess the monetary value of being in the labor force and find that it is substantial for many individuals. Lucas et al. (2004) and Clark et al. (2008) also control for FE and find the strongest effects of unemployment at the time individuals become unemployed. Clark et al. (2008) also find significant lag and lead effects. This paper proceeds as follows. The next section contains a discussion of the conceptual framework. Thereafter, we describe our data and discuss the econometric approach. Then, we present the results and assess their robustness. The last section concludes.

Most individuals in Germany retire voluntarily between the age of 55 and 65. Using comprehensive panel data we show that for those individuals the consequences of retirement are in line with predictions of the life cycle model, namely that individuals choose to consume less when retiring and compensate for this by either consuming leisure or engaging in household production: retirement has a sizable positive effect on satisfaction with free time, a sizable negative effect on household income, and the average effect on life satisfaction is negligible. Moreover, in line with predictions of the Grossman model, namely that the opportunity cost of spending time to invest in health, we find a positive effect of retirement on satisfaction with health. There is a smaller group of individuals who stop working but have—immediately thereafter—at least some intention to go back to work. However, the likelihood for them to find a new job is very small. As compared to voluntary retirement, the effect of involuntary retirement is more negative on satisfaction with income, and less positive on satisfaction with leisure, providing empirical support for the prediction of the life cycle model that they would be willing to give up leisure in order to earn more income and consume more goods. In addition, involuntary retirement has a negative effect on life satisfaction that cannot be explained by its effects on satisfaction with income, free time, and health. This suggests that policies that help individuals who are involuntarily retired are not only helpful for overcoming adverse economic consequences of this, but are also associated with non-economic benefits.