The impact of retirement on psychological well-being in Canada

The objective of this study is to investigate the effect of retirement on psychological wellbeing. The empirical part of this study uses seven longitudinal waves of the Canadian National Population Health Survey, spanning 1994 through 2006. To account for biases due to unobserved individual specific heterogeneity, this study deploys panel data methodologies such as fixed effect method, fixed effect logistic method, and instrumental variable fixed effect method. Using age specific retirement incentives provided by Canada's Income Security System as instruments for retirement behavior, the study finds that retirement has significant positive impact on subsequent psychological well-being. The findings of the study would substantiate the continuity theory notion that retirement may actually improve psychological well-being.