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The Golden Age of Retirement

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  • Bakken, Line Smart

    (Dept. of Economics, University of Oslo)

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    Abstract

    The aim of this paper is to investigate income, saving and consumption for households around retirement age. When doing this, there are different objectives which can be analyzed. First of all it is possible to get some insight of welfare of elderly when they reach retirement. Second, it is interesting to check the predictions of the life-cycle model by investigating consumption trends of households. Register data files are used to construct households which are used in the analysis throughout the paper. Modeling was done for a particular group of Norwegian households who were tracked through their retirement transition period. For each household there are characterizations such as pension income, labor income, wealth accumulation, saving and consumption. The results show that the households increase their after tax income and consumption, and have a high level of net financial wealth. In addition is a connection between high income replacement ratio and low income before retirement found. Households who have high income replacement ratios increase consumption more than households with low income replacement. The results also suggest that retirement decisions are independent of other decision making such as consumption and saving

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    File URL: http://www.sv.uio.no/econ/english/research/memorandum/pdf-files/2006/Memo-22-2006.pdf
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    Bibliographic Info

    Paper provided by Oslo University, Department of Economics in its series Memorandum with number 22/2006.

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    Length: 44 pages
    Date of creation: 21 Aug 2006
    Date of revision:
    Handle: RePEc:hhs:osloec:2006_022

    Contact details of provider:
    Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
    Phone: 22 85 51 27
    Fax: 22 85 50 35
    Email:
    Web page: http://www.oekonomi.uio.no/indexe.html
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    Related research

    Keywords: Life-cycle model; pension income; households; income replacement; retirement behavior;

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    References

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    1. Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
    2. Hamermesh, Daniel S, 1984. "Consumption during Retirement: The Missing Link in the Life Cycle," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 1-7, February.
    3. James Banks & Richard Blundell & Sarah Tanner, 1995. "Is there a retirement-savings puzzle?," IFS Working Papers W95/04, Institute for Fiscal Studies.
    4. Michael Hurd & Susann Rohwedder, 2005. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 242, RAND Corporation Publications Department.
    5. Steven Haider & Melvin Stephens Jr., 2004. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," NBER Working Papers 10257, National Bureau of Economic Research, Inc.
    6. William G. Gale, 1998. "The Effects of Pensions on Household Wealth: A Reevaluation of Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 706-723, August.
    7. Hernæs, Erik & Piggott, John & Zhang, Tao & Strøm, Steinar, 2006. "The Determinants of Occupational Pensions," Memorandum 01/2006, Oslo University, Department of Economics.
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