Retirement and wellbeing in Malaysia: evidence from a regression discontinuity approach

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How does retirement affect wellbeing?

As populations age and the future of work continues to evolve, understanding the implications of retirement on individual wellbeing is becoming increasingly urgent. The decision to retire is a complex, influenced by a whole host of inter-related socio-economic factors.

In a working paper first produced during my study at the LSE, I employ a fuzzy regression discontinuity design to explore the causal effects of retirement on wellbeing, utilizing data from the Malaysian Ageing and Retirement Survey (MARS), and by exploiting a exogeneous discontinuity in retirement probability at age 55.

My analysis reveals that retirement significantly enhances overall wellbeing, with the magnitude of this wellbeing improvement surpassing those associated with major life events such as marriage or the birth of a first child. However, there is substantial heterogeneity in the retirement experience, with individuals’ socio-economic status, health conditions, and education levels playing pivotal roles in determining the extent of these wellbeing gains (or losses).

These findings carry important implications for the design and implementation of retirement and social welfare policies. The evidence suggests that a one-size-fits-all approach to retirement may not adequately address the diverse needs of the ageing population. Policymakers should consider more flexible retirement age policies, allowing for gradual transitions out of the workforce that can accommodate individual circumstances. Additionally, targeted interventions to support retirees with lower education levels, fewer assets, or chronic health conditions could help mitigate the risk of negative wellbeing outcomes for these vulnerable groups.

Download this working paper

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