Using the 2005 one percent population survey and the 2002 Chinese Household Income Project Survey and exploring mandatory retirement policies in China with a regression discontinuity design, we identify the causal effect of retirement on health by focusing on sharp contrasts in retirement between men whose ages are just under and those just above the mandatory retirement age. We find that although it does not affect the probability of functional limitation, retirement does negatively affect both self-reported health status and psychological health represented by the feeling of happiness. We further explore the channel through which retirement affects health and find that this effect can only be partly explained by the sharp income decline after retirement and that education and skills play a significant role in smoothing the transition.