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Study shows link between mental health, retirement savings

Key factors contributing to mental health status affecting retirement savings include the tenuous state of Social Security, longer lifespans, and greater use of defined-contribution pension plans.

By Amy Wallace
A recent study found a significant link between mental health and retirement savings. Photo by bee boys/Shutterstock
A recent study found a significant link between mental health and retirement savings. Photo by bee boys/Shutterstock

Aug. 29 (UPI) -- A new study found that mental health problems have a wide and significant negative effect on retirement savings.

"A growing number of households are dealing with mental health issues like depression and anxiety," Angela Fertig, a research investigator at Medica Research Institute, said in a press release. "Our project studies the effect that mental health issues have on retirement savings because we need to understand how health problems may affect the economic security of this growing population."

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The study, published today in Health Economics, found psychological distress is linked to a 62 percent lower probability of holding retirement accounts, a 47 percent higher probability of married couples withdrawing from their retirement accounts, and married couples having about $42,000 less in retirement savings accounts and single households having about $15,000 less in retirement accounts.

Researchers said key factors that contribute to mental health status affecting retirement savings include longer lifespans, rise of depression and other mental health issues, the tenuous state of the Social Security system and the greater use of defined-contribution pension plans by employers.

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"The magnitude of these effects underscores the importance of employer management policy and government regulation of these accounts to help ensure households have adequate retirement savings," Fertig said. "Better understanding the link between mental health and retirement savings decisions could inform policy interventions that may encourage households to save sufficient funds for retirement through defined contribution plans and shape national changes to the defined contribution plan withdrawal penalties."

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Researchers did not find evidence that psychological distress affects retirement savings through financial literacy or cognitive limitations.

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