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The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement

Michael D. Hurd () and Susann Rohwedder

No 03-12, Working Papers from RAND Corporation Publications Department

Abstract: 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 work-related expenses and the substitution of home production for market-purchased goods and services.

JEL-codes: D91 J26 (search for similar items in EconPapers)
Date: 2003-03
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Related works:
Working Paper: The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement (2005) Downloads
Working Paper: The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement (2004) Downloads
Working Paper: The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement (2003) Downloads
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