The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement
AbstractThe 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.
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Bibliographic InfoPaper provided by RAND Corporation Publications Department in its series Working Papers with number 242.
Length: 33 pages
Date of creation: Feb 2005
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Other versions of this item:
- Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," NBER Working Papers 9586, National Bureau of Economic Research, Inc.
- Michael Hurd & Susann Rohwedder, 2004. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers wp069, University of Michigan, Michigan Retirement Research Center.
- Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 03-12, RAND Corporation Publications Department.
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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