Can the retirement consumption puzzle be solved?

Sarah Smith

No W04/07, IFS Working Papers from Institute for Fiscal Studies

Abstract: This paper uses UK panel data to shed further light on the fall in spending at retirement (the retirement-consumption puzzle). It compares the profiles of spending and well-being at retirement for different groups, defined according to whether retirement is voluntary or involuntary. Where retirement is voluntary, food spending and individual well-being are largely smoothed through retirement; where retirement is involuntary, both food spending and well-being fall. This is consistent with the retirement consumption puzzle being linked to negative wealth shocks. However, there remains one group for whom retirement appears to be voluntary, yet whose spending falls. Fully resolving the puzzle requires a better understanding of how the nature of retirement links to spending and of how different groups substitute leisure for consumption.

Keywords: Retirement spending; panel data (search for similar items in EconPapers)
JEL-codes: D91 (search for similar items in EconPapers)
Pages: 28 pp
Date: 2004-03-02
New Economics Papers: this item is included in nep-lab and nep-mic
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Citations: View citations in EconPapers (15)

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