Effect of Retirement on Life Satisfaction in Canada: Evidence from the 2008–2009 Canadian Community Health Survey–Healthy Aging

Abstract

Retirement is a major transition in the lives of the older population, potentially affecting well-being through the lifestyle, emotional, and financial changes that accompany the transition. In this study, we empirically investigate the effect of retirement on life satisfaction in Canada, using data from the 2008–2009 Canadian Community Health Survey–Healthy Aging. Identifying the effect of retirement on life satisfaction is inherently difficult because of self-selection, reverse causality, and unobserved individual-specific heterogeneity that may affect both life satisfaction and the decision to retire. To address these concerns, we explore the use of the age thresholds from the Old Age Security and the Canada Pension Plan/Quebec Pension Plan as instruments in the decision to retire. The resulting estimates suggest that retirement has a positive and significant effect on the life satisfaction of the older population in Canada. This effect remains significant after we control for age, gender, marital status, educational background, household income, race, immigrant status, and province-level fixed effects.