Females on average live longer but with higher rates of functional impairment and lower physical and economic activities than men. However, research linking retirement to functional impairment and the modifying role of gender and physical activity (PA) is limited especially in low- and middle-income countries. This paper examines the association between retirement and functional impairment in Ghana and evaluates the effect modification of the association by gender and PA. The sample included 1201 adults aged ≥ 50 years from a population-based study. Functional impairment was assessed with the activities of daily living scale. Ordinary least squares regression models adjusted for confounding variables and estimated gender-wise and PA heterogeneity effect of retirement on functional impairment. Regressions showed that retirement predicted an increase in functional impairment score in the full sample (
β= .76, p< .001) and in men ( β= 1.96, p< .001), but not in women. Interestingly, retirement significantly increased functional impairment in ≥ 65 age cohort (full sample: β= .71, p< .005; men: β= 1.86, p< .001) although not in women. However, the effect was significantly moderated by PA such that retirement × PA predicted a decrease in functional impairment in the full sample ( β= −.81, p< .005) and the ≥ 65 age group ( β= −.43, p< .005). Functional impairment risk of retirement is gender-specific, but PA buffers the relationship. Retirement is generally commonplace, but these findings imply that promoting PA may hold promise for addressing functional impairment in old age. Attending to the physical health needs of men during retirement should be a social policy priority.