IDEAS home Printed from https://ideas.repec.org/a/eee/joecag/v26y2023ics2212828x23000282.html
   My bibliography  Save this article

Spending trajectories after age 65 variation by initial wealth

Author

Listed:
  • Hurd, Michael D.
  • Rohwedder, Susann

Abstract

There has been extensive research on the importance of saving for retirement and on tools to support the accumulation of retirement wealth. Much less attention has been paid to the decumulation phase, that is, the spending down of wealth following retirement. Understanding the decumulation phase requires information about the spending patterns of older households and how those patterns evolve with age. This study uses comprehensive longitudinal data on total household spending from a survey that is representative of the older U.S. population to estimate the trajectories of spending after age 65. Based on data spanning the period 2005–2019, real spending declined for both single and coupled households after age 65 at annual rates of about 1.7 percent and 2.4 percent, respectively. Stratification by wealth holdings observed at or closely following age 65 showed sizeable variation in spending levels by wealth quartile, but little variation in rates of change in spending. The fact that spending declines broadly, including among those in the highest wealth quartile, suggests that the decline may not be related to economic position. This view is supported by an analysis of budget shares which show increases with age in the budget share for gifts and donations which suggests that economic position on average does not deteriorate with age, even as spending declines.

Suggested Citation

  • Hurd, Michael D. & Rohwedder, Susann, 2023. "Spending trajectories after age 65 variation by initial wealth," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
  • Handle: RePEc:eee:joecag:v:26:y:2023:i:c:s2212828x23000282
    DOI: 10.1016/j.jeoa.2023.100468
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2212828X23000282
    Download Restriction: no

    File URL: https://libkey.io/10.1016/j.jeoa.2023.100468?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hurd, M., 1999. "Mortality Risk and Consumption by Couples," Papers 99-03, RAND - Labor and Population Program.
    2. Steven J. Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, May.
    3. Susann Rohwedder & Michael D. Hurd & Péter Hudomiet, 2022. "Explanations for the Decline in Spending at Older Ages," Working Papers wp440, University of Michigan, Michigan Retirement Research Center.
    4. Martin Browning & Thomas F. Crossley & Joachim Winter, 2014. "The Measurement of Household Consumption Expenditures," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 475-501, August.
    5. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    6. Eric French & Elaine Kelly & Sean Fahle & Kathleen McGarry & Jonathan Skinner, 2016. "Out‐of‐Pocket Medical Expenditures in the United States: Evidence from the Health and Retirement Study," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 785-819, September.
    7. Anqi Chen & Alicia H. Munnell, 2021. "Do Retirees Want to Consume More, Less, or the Same as They Age?," Issues in Brief ib2021-21, Center for Retirement Research.
    8. F. Thomas Juster & Richard Suzman, 1995. "An Overview of the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages 7-56.
    9. Barbara A. Butrica & Richard W. Johnson & Joshua H. Goldwyn, 2005. "Understanding Expenditure Patterns in Retirement," Working Papers, Center for Retirement Research at Boston College wp2005-3, Center for Retirement Research, revised Jan 2005.
    10. Michael D. Hurd & Angela Lee Duckworth & Susann Rohwedder & David R. Weir, 2012. "Personality Traits and Economic Preparation for Retirement," Working Papers wp279, University of Michigan, Michigan Retirement Research Center.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael D. Hurd & James P. Smith, 2001. "Anticipated and Actual Bequests," NBER Chapters, in: Themes in the Economics of Aging, pages 357-392, National Bureau of Economic Research, Inc.
    2. Michael Hurd & James P. Smith, 2002. "Expected Bequests and Their Distribution," NBER Working Papers 9142, National Bureau of Economic Research, Inc.
    3. Michael D. Hurd & James P. Smith & Julie Zissimopoulos, 2007. "Inter-vivos Giving Over the Lifecycle," Working Papers WR-524, RAND Corporation.
    4. Michael D. Hurd & Susann Rohwedder, 2006. "Some Answers to The Retirement-Consumption Puzzle," Working Papers WR-342, RAND Corporation.
    5. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Savings After Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 177-204, October.
    6. Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 303-350, April.
    7. Kevin X.D. Huang & Frank Caliendo, 2007. "Rationalizing Seven Consumption-Saving Puzzles in a Unified Framework," Vanderbilt University Department of Economics Working Papers 0716, Vanderbilt University Department of Economics.
    8. Michael Hurd & Arie Kapteyn, 2003. "Health, Wealth, and the Role of Institutions," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
    9. Martin Salm, 2010. "Subjective mortality expectations and consumption and saving behaviours among the elderly," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 1040-1057, August.
    10. Siu Fai Leung, 2000. "Why Do Some Households Save So Little? A Rational Explanation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 771-800, October.
    11. Carlos Vidal-Melia & Ana Lejárraga-García, 2004. "The Bequest Motive And Single People’S Demand For Life Annuities," Public Economics 0405005, University Library of Munich, Germany.
    12. Elsa Fornero & Annamaria Lusardi & Chiara Monticone, 2009. "Adequacy of Saving for Old Age in Europe," CeRP Working Papers 87, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    13. Michael Hurd & James P. Smith & Julie Zissimopoulos, 2007. "Inter-vivos Giving Over the Lifecycle," Working Papers 524, RAND Corporation.
    14. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 781-863, Elsevier.
    15. Michael D. Hurd & Susann Rohwedder, 2006. "Some Answers to the Retirement-Consumption Puzzle," NBER Working Papers 12057, National Bureau of Economic Research, Inc.
    16. Freyland, Felix, 2004. "Household composition and savings : an overview," Papers 04-69, Sonderforschungsbreich 504.
    17. Edouard A. Ribes, 2022. "Financial planning and optimal retirement timing for physically intensive occupations," SN Business & Economics, Springer, vol. 2(8), pages 1-28, August.
    18. Salm, Martin, 2006. "Can Subjective Mortality Expectations and Stated Preferences Explain Varying Consumption and Saving Behaviors among the Elderly?," IZA Discussion Papers 2467, Institute of Labor Economics (IZA).
    19. Hugo Benítez-Silva, 2003. "Labor Supply Flexibility and Portfolio Choice: An Empirical Analysis," Working Papers wp056, University of Michigan, Michigan Retirement Research Center.
    20. Michael D. Hurd & Susann Rohwedder, 2008. "The Retirement Consumption Puzzle: Actual Spending Change in Panel Data," NBER Working Papers 13929, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joecag:v:26:y:2023:i:c:s2212828x23000282. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-journal-of-the-economics-of-ageing .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.