Does Health Drive Retirement or Retirement Drive Health?

While health shocks can induce retirement, retirement may also affect health. Using a panel of individuals
aged 51–65 and a staggered difference-in-differences design, we examine retirement choices for people
who experience health shock, and health outcomes for people who retire. Retirements are differentiated by
whether they occur earlier than respondents’ initial planned retirement age, and whether respondents cite
health as a factor. Health shocks are associated with a 40 percent increase in the probability of retiring, a
more than 100 percent increase in the probability of retiring for health reasons, and a 56 percent increase in
the probability of retiring early. Spousal health shocks are associated with a smaller increase in the
probability of retiring early. Non-health related retirements, as well as retirements that do not occur earlier
than planned, are associated with a temporary improvement in self-reported health and an increase in
vigorous exercise.