Retirement and cognitive development: are the retired really inactive?

This paper uses longitudinal test data to analyze the relation between retirement and cognitivedevelopment. Controlling for individual fixed effects, we find that retirees face greater declinesin information processing speed than those who remain employed. However, remarkably, theircognitive flexibility declines less, an effect that appears to be persistent 6 years afterretirement. Both effects of retirement on cognitive development are comparable to those of a fiveto six-year age difference. They cannot be explained by (1) a relief effect after being employedin low-skilled jobs, (2) mood swings or (3) changes in lifestyle. Controlling for changes in bloodpressure, which are negatively related to cognitive flexibility, we still find lower declines incognitive flexibility for retirees. Since the decline in information processing speed afterretirement holds particularly for the low educated, activating these persons after retirementcould lower the social costs of an aging society.