The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement
Hurd, Michael D.; Rohwedder, Susann
2004-01
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 workrelated expenses and the substitution of home production for market-purchased goods and services.Publisher
Michigan Retirement Research Center, University of Michigan, P.O. Box 1248, Ann Arbor, MI 48104
Series/Report no.
WP 2004-069
Types
Working Paper
Metadata
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