The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement

TitleThe Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement
Publication TypeReport
Year of Publication2003
AuthorsHurd, MD, Rohwedder, S
InstitutionNBER
Call Numberwp_2003/Hurd-Rohwedder_NBER9586.pdf
KeywordsConsumption and Savings, Retirement Planning and Satisfaction
Abstract

The simple one-good model of life-cycle consumption requires consumption smoothing. However, British and U.S. households apparently reduce consumption at retirement and the reduction cannot be explained by the life-cycle model. An interpretation is that retirees are surprised by the inadequacy of resources. This interpretation challenges the life-cycle model where consumers are forward looking. However, data on anticipated consumption changes at retirement and on realized consumption changes following retirement show that the reductions are fully anticipated. Apparently the decline is due to the cessation of work-related expenses and the substitution of home production for market-purchased goods and services.

URLhttp://papers.nber.org/papers/W9586
Endnote Keywords

Consumption/Saving/Retirement Behavior

Endnote ID

10162

Citation Key5538