Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations

TitleIs There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations
Publication TypeJournal Article
Year of Publication2007
AuthorsHaider, S, Stephens, Jr., M
JournalReview of Economics and Statistics
Volume89
Issue2
Pagination247-264
Call Numbernewpubs20071203_retire_restat.pdf
KeywordsConsumption and Savings, End of life decisions, Expectations
Abstract

Abstract Previous research finds a systematic decrease in consumption at retirement, a finding that is inconsistent with the life cycle/permanent income hypothesis if retirement is an expected event. In this paper, we use workers subjective beliefs about their retirement dates as an instrument for retirement. After demonstrating that subjective retirement expectations are strong predictors of subsequent retirement decisions, we still find a consumption decline at retirement for workers who retire when expected. However, our estimates of this consumption fall are about a third less than those found when we instead rely on the instrumental variables strategy used in prior studies.

Endnote Keywords

Subjective Expectations/Economic Behavior/Decision Making/Consumption

Endnote ID

18330

Citation Key7170