<p>Increasing life expectancy poses significant challenges to the employment and quality of life of older adults. This study examines the impact of retirement and re-employment on the health of older adults in Korea, utilizing longitudinal data from 2008–2020. We employ the instrumental variables method to estimate causal effects by leveraging variations in pension eligibility age and benefit amounts. The results reveal that retirement leads to a significant deterioration in health outcomes, including self-rated health, chronic diseases, and depression among older individuals. Conversely, re-employment after retirement is associated with a notable improvement in overall health. We find that retirement and re-employment influenced retirees’ health by changing their engagement in physical and social activities. These results suggest that policies encouraging late retirement or facilitating new employment opportunities and social activities post-retirement may mitigate or delay adverse health outcomes among older adults.</p>