Introduction In many countries population aging is contributing to - PDF document

Title: Health trajectories into retirement: a 12 year follow-up study based on HRS data Michael Boissonneault 1,2 and Joop de Beer 1 Abstract Objectives Retirement is a complex process that unfolds over many years. Changes in health that occur alongside this process possibly have an important influence on it, however, this question has mostly been studied using panel data representing individuals at two points in time. We study the impact of health on retirement by modelling individual trajectories of health that are based on data representing individuals at up to 8 points in time, and by linking these trajectories to one of five retirement pathways that account for the complexity of the retirement process. Methods We follow 3,495 Health and Retirement Survey (HRS) participants over an average of 12 years between 1992 and 2014. Health is measured using an index based on health conditions and mental health. We use a retirement typology that comprises the retirement pathways (1) Sustained work until age 66 (2) Crisp transitions into retirement (3) Reversal of the retirement process (4) Gradual retirement and (5) Blurred retirement. Latent class growth analysis is used to model individual health trajectories. Results Four distinct health trajectories for men (Persistently good (21%); Deteriorating (51%); Persistently poor (25%); and improving (3%)) and five for women (Persistently good (24%); Progressive decline (40%); Accelerated decline (19%); Persistently poor (10%); and Improving (7%)) are identified. Non-whites and people with lower education are more likely to be assigned the Persistently poor health trajectory and the Blurred retirement pathway. Persistent poor health leads more often to blurred retirement pathways while persistent good health leads less often to such retirement outcomes. The health trajectory determines the retirement pathway to a greater extent among women than among men. Conclusions Our results show the complex interplay between change in health and transition into retirement, where different health trajectories seem to trigger different retirement patterns. 1 Netherlands Interdisciplinary Demographic Institute (NIDI-KNAW)/University of Groningen, The Netherlands 2 Corresponding author: P.O. Box 11650, NL-2502 AR The Hague, The Netherlands. boissonneault@nidi.nl. ++ 31 (0)70 3565239 1

Introduction In many countries population aging is contributing to increases in the share of non-working to working people (United Nations 2015). This poses concerns about the capacity to maintain economic growth (Bloom et al. 2010) and the sustainability of public pensions (Bongaarts 2004). One policy response consists in encouraging longer economically active lives (OECD 2011). This is being done by increasing the normal retirement age, restricting access to early retirement, or by providing financial incentives for delaying retirement (OECD 2015). However, older workers more often have health complaints which force them to retire before the state pension age (Ilmarinen 2001). Such forced retirements form a hurdle towards longer economically active lives and induce public spending through disability benefits programs (OECD 2010). As a result, it is important to have a better understanding of how declining health forces older workers to leave the workforce early. Retirement is not viewed anymore as a clear-cut, once-in-a-lifetime transition, but rather as a complex process that takes place over several years (Schultz and Olsen 2013). Consequently, some referred to retirement as a phase (Denton & Spencer 2009; Borland 2005). The retirement phase starts with the end of some “relatively permanent pattern of labor market activity” (Borland p. 1), or of a “career job” (Feldman 1994), and ends up with the entry into full and permanent retirement, or death. Although these two events can directly follow each other, the retirement phase often includes many intermediate segments. Such segments include bridge- employment (Cahill 2013) or “unretirement” (Maestas 20 10), for example. Empirical evidence showed that, in the United States, retirement patterns that include such intermediate segments are quite common: between one-third and two-thirds of older American workers ever experience bridge-jobs (Cahill 2006; Cahill 2013), and up to on e fourth “unretire” (Maestas 2010). Others have identified the presence of “blurred” segments inside the retirement phase, for example when someone first becomes unemployed and then truly retires, making it difficult to assess when the transition into retirement actually occurred (Mutchler 1999). In sum, properly studying retirement supposes taking into account that retirement may be ambiguous and reversible. Considering the phenomenon over a longer time frame may thereby help providing a more accurate picture. 2

Health is usually considered as the second most important predictor of retirement, after economic incentives. It is convenient to view health as part of the work ability framework (Ilmarinen 2001). Work ability is “a process of human resources in relation to work” (Ilmarinen 2001, p. 549). An important component of such human resources is a person’s health. As people age and their health deteriorates, the human resources that can be taped into in order to answer work demands also decline. One way that older workers can cope with declining resources is by adjusting their work. This can be done for example by adjusting the amount of hours worked or by changing tasks. For the older worker, such changes are often viewed as some pre-retirement phase. As a result, the succession of segments that characterize the retirement process could in part reflect changes in human resources that takes place with age. However, most studies are ill- designed to study this question because health and retirement are defined on the base of data representing individuals at usually one or two points in time only (Burdorf 2012; Beehr and Bowling 2013; Amick 2015). Most studies so far focused on one stage of the retirement process only. They focused for example on single transitions from full time work into early retirement (Alavinia et al. 2008; Pit et al. 2010, Karpansalo 2004; Leijten 2015; Pietilainen 2011; Robroek 2013; Schuring 2013; Van den Berg 2010), from retirement back to work (i.e. unretirement) (Maestas 2010; Cahill 2013), from career jobs to bridge-jobs (Cahill et al. 2013; Kerr & Amstrong-Stassen 2011) or from full time work to part-time work or partial retirement (Cahill et al. 2013). The same studies often considered health at one point in time only, either immediately before (Karpansalo 2004; Leijten 2015; Pietilainen 2011; Robroek 2013; Schuring 2013; Van den Berg 2010) or after some retirement transition (Alavinia et al. 2008; Pit et al. 2010). We note, however, some exceptions, mainly from the economic literature. Some have considered economic activity over a period of more than 2 years, paying attention to sequences of labor activity and ordering individuals into “crisp” and “blurred” retirement patterns (Mutchler et al. 1997). Others have considered health at two points in time, distinguishing between “contemporaneous” and “lagged” health (Disney 2006; Jones 2010), or considering “health shocks”, which is the diff erence in values of health between two points in time (Erdogan-Cifti et al. 2008; Riphahn 1999). One study considered health at three points in time, which allowed to account for the rate at which health deteriorates prior to some retirement transition (Bound et al. 1999). These studies allowed to postulate that change in health plays some role in determining retirement transitions, over and beyond health as 3