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Retirement Consumption and Pension Design

Author

Listed:
  • Jonas Kolsrud
  • Camille Landais
  • Daniel Reck
  • Johannes Spinnewijn

Abstract

This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption-smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.

Suggested Citation

  • Jonas Kolsrud & Camille Landais & Daniel Reck & Johannes Spinnewijn, 2023. "Retirement Consumption and Pension Design," NBER Working Papers 31628, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31628
    Note: AG PE
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    Cited by:

    1. Zhao, Weimin & Chen, Na, 2024. "Does old-age security promote rural residents' consumption? A decomposition based on contribution and replacement rates," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 817-830.
    2. Oh, Jongseok & Son, Seho & Lee, Kun, 2025. "Exclusion from a ‘mandatory’ pension scheme: Late-stage dropouts from the National Pension System in South Korea," The Journal of the Economics of Ageing, Elsevier, vol. 31(C).
    3. Jamie Hentall-MacCuish, 2024. "Costly attention and retirement," IFS Working Papers W24/59, Institute for Fiscal Studies.
    4. Ivanov, Katerina & Tian, Weidong, 2024. "Optimal early retirement with target wealth," Journal of Economic Dynamics and Control, Elsevier, vol. 167(C).
    5. Kruse, Herman & Myhre, Andreas S., 2025. "Early retirement provision for elderly displaced workers," The Journal of the Economics of Ageing, Elsevier, vol. 31(C).
    6. Huang, Wei & Lei, Xiaoyan & Zhang, Chunfeng, 2025. "Green retirement: The impact of retirement on carbon emissions through consumption and income dynamics," Journal of Comparative Economics, Elsevier, vol. 53(3), pages 727-753.
    7. Inukai, Shinya, 2025. "The impacts of raising the public pension eligibility age on time allocation of elderly people: Evidence from Japan," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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