Do the sick retire early? Chronic illness, asset accumulation and early retirement

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Abstract:

Our objective is to determine how chronic illness affects asset accumulation and retirement. Previous studies have found that poor health leads to early retirement, but those studies failed to look at the indirect impact of chronic illness on retirement. Using data from the Health and Retirement Study, we define an illness as chronic if the individual reports having asthma, cancer, heart disease, stroke or diabetes for four or more years. We first estimate how a chronic illness influences asset accumulation. We then estimate how asset accumulation and current poor health influence retirement. We observe that the vast majority of the chronically ill population do not report their general health to be poor nor do they report functional limitations in activities of daily living. Nevertheless, our results indicate that chronic illness leads these people to accumulate fewer assets during their working years and consequently retire later. Neither researchers nor policy-makers discussing the many critical issues surrounding illness and retirement have addressed this issue.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840600690165

Affiliations: 1: Department of Economics, West Virginia State University, Institute, WV, USA 2: Department of Economics, Northern Illinois University, DeKalb, IL, USA

Publication date: August 1, 2007

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