TY  - JOUR
AU  - Haider,Steven
AU  - Stephens,Melvin,Jr.
TI  - Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10257
PY  - 2004
Y2  - February 2004
UR  - http://www.nber.org/papers/w10257
L1  - http://www.nber.org/papers/w10257.pdf
N1  - Author contact info:
Steven J. Haider
Department of Economics
Michigan State University
101 Marshall Hall
East Lansing, MI 48824
Tel: 517/355-1860
Fax: 517/432-1068
E-Mail: haider@msu.edu

Melvin Stephens, Jr.
University of Michigan
Department of Economics
341 Lorch Hall
611 Tappan St.
Ann Arbor, MI 48109-1220
Tel: 734/647-5606
E-Mail: mstep@umich.edu
AB  - Previous research finds a systematic decrease in consumption at retirement, a finding that is inconsistent with the Life-Cycle/Permanent Income Hypothesis if retirement is an expected event. In this paper, we use workers' subjective beliefs about their retirement dates as an instrument for retirement. After demonstrating that subjective retirement expectations are strong predictors of subsequent retirement decisions, we still find a retirement consumption decline for workers who retire when expected. However, our estimates of this consumption fall are about a third less than those found when we instead rely on the instrumental variables strategy used in prior studies. Finally, we examine a number of hypotheses that have been put forward to explain the retirement consumption decline. We find little empirical support for these explanations in our data.
ER  -