Health Risks and Planned Retirement Age: Evidence from the Health and Retirement Study

Objective: Availability of post-retirement health insurance could be an important determinant in the retirement decision of the near-elderly group.  Nonetheless, individuals who face health risks may have different retirement planning than those who do not. The objective of the current study is to examine the impact of health risks on the decision of planned retirement age, using the longitudinal Health and Retirement Survey data from 2000-2008.

Method:  The study sample included respondents those who reported working for pay at the baseline (2000). The outcome of interest in this study was planned retirement age. It was constructed as a binary variable based on the longitudinal responses during 10-year period which indicated whether they actually retired according to the planned retirement age that they reported at the base line. This variable was created in conjunction with respondents’ labor market status in in each survey year. The primary independent covariate of interest was a measure of health risks which includes health status that limits the work activities.  It measured whether respondents reported any health problem that limits the kind of paid work activities that they perform. The experienced health problem during the 10-year period was converted into a probability by summing the responses of the indicator variables and dividing the sum by 5. The second measure of health risk was the self-assessed probability of health problems that will limit work in next 10-year period was also included in the model. The logistic regression model controlled for other demographics, health status, financial wealth, whether respondents had continuation of retirement coverage through employment and current health insurance coverage.

Results. The impact of health risks on planned retirement age was examined for male and female separately. Preliminary results suggest that female were less likely to retire according to the planned retirement age those who experienced higher health risks (Odds ratio estimate: 0.55, p<0.001), however, no significant impact was observed for male respondents. The likelihood of being retired at planned retirement age was also less for females those who had continuation of retirement coverage through their employment.  Respondents those who had employer sponsored health insurance coverage consistently during the study period were more likely to retire based on their planned retirement age. This effect was significant and similar for both men and women.

Conclusion: Apart from health insurance coverage, the decision on planned retirement age is also influenced by health risks that individuals face.  Therefore, improvement in health in pre-retirement age could lower the risk of health problem limiting paid work and help individuals to retire at their planned retirement age.