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Can the retirement consumption puzzle be solved?

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  • Sarah Smith

    ()
    (Institute for Fiscal Studies and Centre for Market and Public Organisation)

Abstract

This paper uses UK panel data to shed further light on the fall in spending at retirement (the “retirement-consumption puzzle”). It compares the profiles of spending and well-being at retirement for different groups, defined according to whether retirement is voluntary or involuntary. Where retirement is voluntary, food spending and individual well-being are largely smoothed through retirement; where retirement is involuntary, both food spending and well-being fall. This is consistent with the retirement consumption puzzle being linked to negative wealth shocks. However, there remains one group for whom retirement appears to be voluntary, yet whose spending falls. Fully resolving the puzzle requires a better understanding of how the nature of retirement links to spending and of how different groups substitute leisure for consumption.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/07.

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Length: 28 pp
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/07

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Related research

Keywords: Retirement spending; panel data;

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Cited by:
  1. Lührmann, Melanie, 2007. "Consumer Expenditures and Home Production at Retirement: New Evidence from Germany," Sonderforschungsbereich 504 Publications 07-13, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Nicole Maestas, 2007. "Back to Work: Expectations and Realizations of Work after Retirement," Working Papers 196.2, RAND Corporation Publications Department.
  3. Michael D. Hurd & Susann Rohwedder, 2006. "Some Answers to the Retirement-Consumption Puzzle," NBER Working Papers 12057, National Bureau of Economic Research, Inc.
  4. Michael Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities at Retirement," DNB Working Papers 039, Netherlands Central Bank, Research Department.
  5. Fe, Eduardo & Hollingsworth, Bruce, 2012. "Estimating the eect of retirement on mental health via panel discontinuity designs," MPRA Paper 38162, University Library of Munich, Germany.
  6. Somphoom Sawaengkun Author_Email: somphoom@yahoo.com, 2011. "Household Consumption And Old-Age Population: Empirical Study For Thailand And Japan," Annual Summit on Business and Entrepreneurial Studies (ASBES 2011) Proceeding 2011-015-136, Conference Master Resources.
  7. José M. Labeaga & Rubén Osuna, 2007. "Expenditures at retirement by Spanish households," Working Papers 2007-36, FEDEA.
  8. Polly Vizard, 2010. "Developing and agreeing a capability list in the British context: What can be learnt from social survey data on ‘rights’?," CASE Papers case142, Centre for Analysis of Social Exclusion, LSE.

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