Does Retirement Improve Health and Life Satisfaction

We utilize panel data from the Health and Retirement Study to investigate the impact of retirement on physical and mental health, health care utilization, and life satisfaction. Because poor health can induce retirement, we instrument for retirement using eligibility for Social Security and employer sponsored pensions and coverage by the Social Security earnings test. We find strong evidence that retirement improves both health and life satisfaction. While the impact on life satisfaction is immediate, improvements in health show up 4-6 years after retirement, consistent with the view that health is a stock that evolves slowly. We find no evidence that retirement influences health care utilization