Despite the stable incidence of mental disorders in Finland and Europe, mental health-related occupational disability has been increasing. We unveiled the paths to permanent psychiatric disability, recovery, or death, by analysing sequences of labour market participation. The RETIRE register database includes information regarding all persons (n = 42,170) awarded an ICD-10 psychiatric disability pension between 2010 and 2015 in Finland. We identified clusters of typical paths of pre-retirement labour market history. Controlling for major mental disorders, age, and sex, we evaluated factors associated with returning to work (RTW), or death, over a 5-year follow-up period. Only 10.5% of the disabled subjects returned to work within the follow-up. Half of them ended up with a permanent disability pension. Seven distinguishable paths to disability were identified. Subjects in the cluster characterized by steady employment were relatively often females, lost their work ability due to affective disorders, and had the highest rate of returning to work (16.3%). Mortality was highest (9%) among the cluster characterized by long-term unemployment. Distributions of major diagnostic groups, as well as age and sex, differed between clusters. After their adjustment in the analysis of RTW or death, the identified labour market history paths prior to losing work ability remained as important independent prognostic factors for both outcomes. The complex retirement process involves identifiable clinical and contextual associating factors. Labour market history patterns associate with varying prognoses after psychiatric retirement. Prolonged unemployment appears as a predictor of relatively poor prognoses, whereas employment indicates the opposite.