IESOP: Independence and Economic Security of the Older Population

Abstract of Research Paper No. 29
The Economic Consequences of Forced Retirement Due to Poor Health
by Lynn McDonald, Peter Donohue, and Brooke Moore

This multimethod study investigated the effect of involuntary retirement on retirement income. Using the General Social Survey 1994, a secondary data analysis was carried out which examined the economic effects of retiring because of poor health. When the men and women who retired for reasons of poor health were compared to those who retired for other reasons, there was little doubt that the health retirees were disadvantaged on human capital variables, in terms of their work history, and ultimately, in their retirement income, whether personal or household.

The men who retired because of ill health did not appear to benefit from government transfer payments and were less likely to receive income from a private pension or from interest and dividends. The women retirees suffered from the same disadvantages as the men, however, when they reached retirement they were more likely to rely on government transfer payments as a major source of income. Like the men, they were more likely to believe that their retirement income had gotten worse since the day they retired, and, over two-thirds believed that their financial situation had become much worse.

In the multivariate analyses, however, any effect that poor health might have had on household income was offset by the benefits associated with marriage, and their own sociodemographic characteristics. This is further confirmed when personal income is considered, since marriage has the strong and negative influence on personal income. The interviews with the retirees indicated that retiring for reasons of poor health was seen by most people as a somewhat unpleasant transition that had long lasting and negative effects on retirement income.

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Last updated: Mar 30, 1999.