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Can the retirement consumption puzzle be solved?

Author

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  • Sarah Smith

    (Institute for Fiscal Studies and University of Bristol)

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.

Suggested Citation

  • Sarah Smith, 2004. "Can the retirement consumption puzzle be solved?," IFS Working Papers W04/07, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:04/07
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    File URL: http://www.ifs.org.uk/wps/wp0407.pdf
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    Citations

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    Cited by:

    1. Nicole Maestas, 2007. "Back to Work: Expectations and Realizations of Work after Retirement," Working Papers 196.2, RAND Corporation.
    2. Lührmann Melanie, 2010. "Consumer Expenditures and Home Production at Retirement – New Evidence from Germany," German Economic Review, De Gruyter, vol. 11(2), pages 225-245, May.
    3. Michael D. Hurd & Susann Rohwedder, 2006. "Some Answers to the Retirement-Consumption Puzzle," NBER Working Papers 12057, National Bureau of Economic Research, Inc.
    4. Fe, Eduardo & Hollingsworth, Bruce, 2012. "Estimating the eect of retirement on mental health via panel discontinuity designs," MPRA Paper 38162, University Library of Munich, Germany.
    5. Li, Hongbin & Shi, Xinzheng & Wu, Binzhen, 2016. "The retirement consumption puzzle revisited: Evidence from the mandatory retirement policy in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 623-637.
    6. Polly Vizard, 2010. "Developing and agreeing a capability list in the British context: What can be learnt from social survey data on ‘rights’?," CASE Papers case142, Centre for Analysis of Social Exclusion, LSE.
    7. Nicole Maestas, 2010. "Expectations and Realizations of Work after Retirement," Journal of Human Resources, University of Wisconsin Press, vol. 45(3).
    8. repec:bla:germec:v:11:y:2010:i::p:225-245 is not listed on IDEAS
    9. Somphoom Sawaengkun Author_Email: somphoom@yahoo.com, 2011. "Household Consumption And Old-Age Population: Empirical Study For Thailand And Japan," Annual Summit on Business and Entrepreneurial Studies (ASBES 2011) Proceeding 2011-015-136, Conference Master Resources.
    10. Acerbi, Alberto & Sacco, Pier Luigi, 2022. "The self-control vs. self-indulgence dilemma: A culturomic analysis of 20th century trends," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    11. Michael D. Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities in Retirement," Working Papers wp096, University of Michigan, Michigan Retirement Research Center.
    12. Acerbi, Alberto & Sacco, Pier Luigi, 2021. "The self-control vs. self-indulgence dilemma: A culturomic analysis of 20th century trends," OSF Preprints xgqt5, Center for Open Science.
    13. José M. Labeaga & Rubén Osuna, 2007. "Expenditures at retirement by Spanish households," Working Papers 2007-36, FEDEA.
    14. Michael D. Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities in Retirement," Working Papers wp096, University of Michigan, Michigan Retirement Research Center.

    More about this item

    Keywords

    Retirement spending; panel data;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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