The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement
The 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 workrelated expenses and the substitution of home production for market-purchased goods and services.
|Date of creation:||Jan 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (734) 615-0422
Fax: (734) 647-4575
Web page: http://www.mrrc.isr.umich.edu/publications/papers/Email:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hamermesh, Daniel S, 1984.
"Life-Cycle Effects on Consumption and Retirement,"
Journal of Labor Economics,
University of Chicago Press, vol. 2(3), pages 353-70, July.
- James Banks & Richard Blundell & Sarah Tanner, 1995.
"Is there a retirement-savings puzzle?,"
IFS Working Papers
W95/04, Institute for Fiscal Studies.
- King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : II. New directions," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 309-341.
- Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
- B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001.
"What Accounts for the Variation in Retirement Wealth among U.S. Households?,"
American Economic Review,
American Economic Association, vol. 91(4), pages 832-857, September.
- B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," Working Papers 97035, Stanford University, Department of Economics.
- B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," NBER Working Papers 6227, National Bureau of Economic Research, Inc.
- John Ameriks & Andrew Caplin & John Leahy, 2002.
"Retirement Consumption: Insights from a Survey,"
NBER Working Papers
8735, National Bureau of Economic Research, Inc.
- Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
- Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:mrr:papers:wp069. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator)
If references are entirely missing, you can add them using this form.