TY  - JOUR
AU  - Hurd,Michael D.
AU  - Rohwedder,Susann
TI  - The Retirement Consumption Puzzle:  Actual Spending Change in Panel Data
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13929
PY  - 2008
Y2  - April 2008
UR  - http://www.nber.org/papers/w13929
L1  - http://www.nber.org/papers/w13929.pdf
N1  - Author contact info:
Michael D. Hurd
RAND Corporation
1776 Main Street
Santa Monica, CA 90407
Tel: 310/451-6945
Fax: 310/451-6923
E-Mail: mhurd@rand.org

Susann Rohwedder
RAND
1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407
Tel: 310-393 0411,ext. 7885
Fax: 310-451-6923
E-Mail: Susann_Rohwedder@rand.org
AB  - The simple one-good model of life-cycle consumption requires that consumption be continuous over retirement; yet prior research based on partial measures of consumption or on synthetic panels indicates that spending drops at retirement, a result that has been called the retirement-consumption puzzle. Using panel data on total spending, nondurable spending and food spending, we find that spending declines at small rates over retirement, at rates that could be explained by mechanisms such as the cessation of work-related expenses, unexpected retirement due to a health shock or by the substitution of time for spending. In the low-wealth population where spending did decline at higher rates, the main explanation for the decline appears to be a high rate of early retirement due to poor health. We conclude that at the population level there is no retirement consumption puzzle in our data, and that in subpopulations where there were substantial declines, conventional economic theory can provide the main explanation.
ER  -