Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations / Steven Haider, Melvin Stephens Jr..

Format:

Book

Author/Creator:

Haider, Steven.

Contributor:

National Bureau of Economic Research.

Stephens, Melvin, Jr.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10257.

NBER working paper series no. w10257

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

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.

Notes:

Print version record

February 2004.