The retirement consumption conundrumEvidence from a consumption survey

The

retirement consumption conundrum

Evidence from a consumption survey

Fisher

Jonathan

Fisher, Jonathan

Author

Johnson

David S.

Johnson, David S.

Author

Marchand

Joseph

Marchand, Joseph

Author

Smeeding

Timothy M.

Smeeding, Timothy M.

Author

Torrey

Barbara Boyle

Torrey, Barbara Boyle

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20052005monographic

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2005

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

While the life-cycle hypothesis predicts that consumption remains smooth during the transition from work into retirement, recent studies have shown that consumption declines at retirement. This empirical result has been referred to as the retirement consumption puzzle. Previous literature has most often relied on food expenditures to estimate the decline in consumption at retirement.

We add to this literature by using broader definitions of consumption data from the Consumer Expenditure Survey (CEX), which is a survey designed to estimate total household expenditures. We conduct cohort analysis, using data on four cohorts over 20 years from 1984 to 2003. Our results using only food expenditures are on the lower end of the distribution of existing results. As we use broader measures of consumption, our results suggest that the retirement consumption conundrum decreases by more than half. Further, another contribution of this analysis is to widen the focus of the study of the well-being of the elderly. The retirement consumption puzzle does not tell the whole story on the well-being of the elderly. While we find that consumption-expenditures decrease by about 2.5 percent when individuals retire, expenditures continue to decline at about a rate of 1 percent per year after that.

Jonathan Fisher, David S. Johnson, Joseph Marchand, Timothy M. Smeeding, and Barbara Boyle Torrey.

CRR WP2005-14

CRR WP

2005-14

http://crr.bc.edu/images/stories/Working_Papers/WP_2005-14.pdf

MChBEnglisheng

MChB

Englisheng

English

eng