Oct 23, 2008
Evidence from Panel Data
Published in: The Review of Economics and Statistics, v. 93, no. 3, Aug. 2011, p. 1094-1099
Posted on RAND.org on August 01, 2011
Previous empirical literature has found a sharp decline in consumption during the first years of retirement, implying that individuals do not save enough for their retirement. This phenomenon is called the retirement consumption puzzle. We find no evidence of the retirement consumption puzzle using panel data from 1980 to 2000. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many of the previous studies. We find that food expenditure declines at retirement, which is consistent with previous studies.