The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement
Michael Hurd () and
No 03-12, Working Papers from RAND Corporation
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)
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Working Paper: The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement (2005)
Working Paper: The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement (2004)
Working Paper: The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement (2003)
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