Increases in well-being in the transition to retirement for unemployed. Catching up with formerly employed persons

This paper examines the extent to which well-being levels change in the transition to retirement depending on transitioning from being employed, unemployed, or economically inactive. Whereas transitioning from employment to unemployment has been found to cause a decrease of subjective well-being with more time spent in unemployment, it is not clear how transitioning from unemployment to retirement affects well-being levels. We use the Survey of Health, Ageing and Retirement in Europe to monitor life satisfaction of respondents who retire in between two waves. We portray well-being scores before and after retirement and then identify the change in life satisfaction during the retirement transition using a First Difference model. Results indicate that being unemployed before retirement is associated with an increase in life satisfaction, but presents mainly a catching-up effect compared to employed persons transitioning to retirement. Retirement from labour market inactivity does not lead to significant changes in well-being. Findings are robust to selection into unemployment and country differences. As well-being of unemployed persons recovers after transitioning to retirement, especially the currently unemployed population should be supported to prevent detrimental consequences of economically unfavourable conditions and lower well-being.