Heterogeneity in Household Spending and Well-being around Retirement

Patrick Moran, Martin O\rquote Connell, Cormac O\rquote Dea and Francesca Parodi
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Martin O\rquote Connell: University of Wisconsin-Madison and IFS
Cormac O\rquote Dea: Yale University, IFS and NBER

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: We study heterogeneity in spending patterns around the time of retirement. Using rich consumption data from the Panel Study of Income Dynamics, and exploiting within-household spending variation, we systematically classify households into groups characterized by differences in consumption transitions at retirement. We decompose the overall spending changes into the contribution made by different subcomponents of consumption. We find that the households that increase their spending shift budget away from food and toward transportation, recreation, and trips. In contrast, those households for which spending falls reduce the budget share spent on transportation and food away from home, while increasing the share allocated to food at home and housing expenditures. Using a life-cycle model, we characterize the mechanisms capable of driving these observed patterns.

Pages: 63 pages
Date: 2021-09
New Economics Papers: this item is included in nep-age and nep-mac
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Citations: View citations in EconPapers (1)

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