The lifecycle impact of diabetes on retirement

Empirical research has established that diabetes lowers the age of retirement. This study decomposes the effect of diabetes on retirement into a direct effect of poor health at retirement age and an indirect lifecycle effect of reduced asset accumulation over working years. We use retrospective data drawn from the Health and Retirement Study in log-linear regressions of asset levels and probit analyses of retirement to estimate these effects. Our results indicate that diabetes reduces asset accumulation. In turn, we find that lower asset levels significantly reduce the probability of retirement. In contrast, poor health increases the probability of retirement. After controlling for health status and assets, we find no further impact of diabetes on retirement behaviour, suggesting that our assets and health variables adequately capture the effects of diabetes. While poor health is associated with an increase in the probability of retirement, most diabetic workers do not report their health to be poor. For these workers, diabetes leads to the accumulation of fewer assets and later retirement, an effect that needs to be considered by researchers and policy-makers discussing the many critical issues surrounding diabetes.