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A new study has found the increase in retirement age can do more harm than good.

New study: Increase in retirement age impacts health

A new study has found people who stop work earlier are more likely to experience all the benefits of retirement.

With the retirement age increasing to 67 last year, the study found that this could be more damaging to people's health and wellbeing.

According to Dr Rong Zhu, senior lecturer in economics at Flinders University, only 30 per cent of Australians can afford to retire before they are eligible for a pension.

"We need to consider the unintended consequences of delayed retirement for health and wellbeing via a reduced sense of internal locus of control," Dr Zhu told AAP.

"If workers work beyond retirement age, they are less likely to consider life outcomes as a result of their own choices and actions."

Dr Zhu said delaying retirement could impede the benefits workers might look forward to later in life.

"Our paper shows retirement significantly improves older people's physical and mental health as well as their subjective well-being as measured by life satisfaction," Dr Zhu said.

"One-third of the positive impact of retirement on health, and one-fifth of that on wellbeing, can be explained by the retirement-driven increase in internal locus of control.

"Facing an increased eligibility age for the age pension, if an older person defers retirement, then the health and wellbeing benefits associated with retirement also come at a later date."

According to the Australian Bureau of Statistics, there were 4.1m retirees, with 28 per cent of them retiring due to reaching the age.

The maximum full Age Pension is $1,116.30  per fortnight for a single person and $841.40 per person per fortnight for a couple.

The Age Pension is a significant source of income for many retirees, with roughly 39 per cent receiving the full Age Pension and a further 24 per cent receiving a part pension.

However, the recent intergenerational report revealed that over the next 40 years, individuals relying on the pension are projected to decrease by 15 per cent.

This decline is anticipated despite an overall increase in the wealth of older Australians due to growth in superannuation funds and asset accumulation.

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