Germans retire early. On the one hand, early retirement is very costly and amplifies the burden which the German public pension system has to carry due to population aging. On the other hand, however, early retirement is also seen as a much appreciated social achievement which increases the well-being especially of those workers who suffer from work-related health problems. This paper investigates the relation between early retirement and well-being using the GSOEP panel data. The general picture that emerges from our analysis is that early retirement as such seems to be related to subjective well-being, in fact more so than normal retirement. Early retirement most probably is a reaction to a health shock. Individuals are less happy in the year of early retirement than in the years before and after retirement. After retirement, individuals attain their pre-retirement satisfaction levels after a relatively short while. Hence, the early retirement effect on well-being appears to be negative and short-lived rather than positive and long. Whether this is an effect of retirement itself or a psychological adaptation to an underlying shock cannot be identified in our data and remains an open research issue waiting for a more objective measurement of health.
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Paper provided by Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim in its series MEA discussion paper series with number
07134.
Length: Date of creation: 03 Jul 2007 Date of revision: Handle: RePEc:mea:meawpa:07134
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