How do economic shocks impact upon the mental health of retirees?

Economic crises are common, but their timing is uncertain. This paper examines whether the mental health and well-being effects of retirement change in the presence of major economic shocks. Using a range of causal empirical methodologies, with a particular focus on a fixed-effects instrumental variables approach, we analyse longitudinal data from the English Longitudinal Study of Ageing (ELSA) covering a representative sample of over 50-year-old individuals in England. We exploit regional variations in unemployment rates following the economic crisis in the short term (2004–2013) and the longer term (2004–2019). The findings show that moving into retirement while living in a region and year particularly hit by the crisis significantly decreases the probability of reporting a new depression or anxiety diagnosis by 4.9 percentage points, mostly driven by white-collar and men retirees. We show that financial security, healthy lifestyles, and the ability to early retirement help maintain the mental health benefits of retirement during economic crises. These findings suggest that policies enhancing financial security and resilience and promoting healthy lifestyle initiatives could bolster retirees’ resilience and support healthy ageing.