The myriad risks of early retirement

The myriad risks of early retirement

The myriad risks of early retirement

Leaving the daily grind early has long been held as a joy and a privilege; in fact, some members of the younger generation even push themselves to reach the retirement finish line decades before they’re 65. But those who chase after early retirement often overlook its negative aspects.

“The problem for researchers is measuring which is the more powerful force—the joys of a more leisurely life or the downsides,” wrote Dr. Richard W. Johnson, director of the Urban Institute’s program on retirement policy, in the Wall Street Journal.

Citing academic studies that use statistical models, Johnson said that an abundance of research indicates that qualifying for retirement benefits is associated with intensified health problems, while policies encouraging work mitigate such issues.

In one 2018 study, researchers from Cornell University and the University of Melbourne found that men in the US are 2% more likely to die in the month they turn 62 — the age at which US citizens can first start collecting Social Security retirement benefits — than in the previous month. According to Johnson, that mortality surge is driven largely by increased incidence of death from lung cancer and chronic obstructive pulmonary disease, whose risk factors include smoking and lack of physical activity.

Another study looked at a Dutch policy change in 2009 that provided workers bonuses of 5%, 7%, and 10% at the ages of 62, 63, and 64. Based on data coming from this temporary policy innovation — the incentives were eliminated in 2013 — researchers from the Center for Retirement Research at Boston College concluded that delaying retirement reduced the five-year mortality risk for men in their early 60s by 32%.

Other data suggests that people’s cognitive faculties decline when they stop doing work. An analysis of data covering the US, England, and 11 European countries showed that retirement significantly reduces cognitive function. “When people retire, they typically get less mental exercise, because work activities are generally more cognitively stimulating than home activities,” Johnson said.

Social isolation was another risk factor. While one would expect retirees to have more time for socialization, researchers from Cornell University and Syracuse University found that the size of people’s social networks and the frequency of their social interactions decreased after their retirement. With smaller networks and increased isolation, people tend to suffer decreased life satisfaction as well as impaired physical and mental health.

“[P]erhaps the biggest downside of retirement is financial,” Johnson said, noting that Social Security replaces only about 40% of a typical paycheque, employer pensions are much less common than before, and relatively few people have saved enough in their retirement plans to guarantee security in their old age.

Longer employment, he noted, can counter those risks. Referring to work done in the Urban Institute, he said that an additional year of work can raise future annual retirement income by an estimated 9% on average. Low-income workers stand to gain even more (16%) as their government-provided retirement benefits replace a higher share of their wages compared to high-wage workers.

To help older workers stay on the job, Johnson suggested a variety of policy changes. Aside from strengthening federal laws against age discrimination in the workplace, he said there could be more investment in programs and benefits for older unemployed workers. A revamp of education and training approaches to prioritize lifelong learning could also help older workers keep their skills up-to-date.


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