The validity of health limitations as a reason for deciding to retire

Many studies of the decision to retire have found that self-reported poor health increases the probability of retirement. Yet doubts have been expressed about whether such reported health problems constitute a genuine reason rather than a socially acceptable justification for not working. Our analysis shows conclusively that the probability of dying within two years after retiring and the probability of seeking medical care at the time of retiring are much higher for all retirees who report work-limiting health problems and especially for those who report such problems and retire before age 65. These findings, which imply that those retirees who report work-limiting health problems do not use health as an excuse for retiring, have important implications for public policy. The 1983 Amendments to the Social Security Act specified a gradual increase in the age of entitlement to the full amount of annual benefits, from age 65 to age 67. This delay in benefits is likely to cause financial hardship for workers whose health problems impair their ability to work because they will not be able to offset their loss of benefits through earnings from continued work.