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Conference Paper BHPS-2005 Conference: the 2005 British Household Panel Survey Research Conference, 30 June -2 July 2005, Colchester, UK

Can the retirement-consumption puzzle be resolved? Evidence from the British Household Panel Study

Authors

Publication date

2005

Abstract

Previous studies have found that consumption falls significantly at retirement, even
allowing for obvious work-related spending items. This is in contrast to the
predictions of the standard life-cycle model of consumption. This fall in spending,
common to a number of countries, has become known as the 'retirement-consumption
puzzle'.
The paper uses data from the British Household Panel Survey to shed further light on
what happens to spending at retirement. Comparing food spending for men retiring
involuntarily early (through ill health or redundancy) with spending for those who
retire voluntarily, it finds a significant fall in spending only for those who retire
involuntarily. This is consistent with the observed fall in spending being linked to a
negative wealth shock for some retirees. Evidence on psychological and financial
well-being also indicates that the retirement experience of involuntary retirees is very
different to that of voluntary retirees.

Subjects

Older People, Income Dynamics, and Household Economics

Links

http://www.iser.essex.ac.uk/bhps/2005/download.php

#507730


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