This paper addresses whether households save enough for their retirement. For successive date-of-birth cohorts we analyze income and expenditure patterns around the time of retirement. We find a fall in consumption as household heads retire which cannot be fully explained by a forward-looking consumption-smoothing model that accounts for expected demographic changes and mortality risk. Controlling for labor-market participation explains part, but not all, of this dip. We argue that the only way to reconcile fully the fall in consumption with the life-cycle hypothesis is with the systematic arrival of unexpected adverse information.
Authors
CPP Co-Director
James is Senior Research Fellow and Professor of Economics at Manchester, working on broad issues in the economics of retirement, savings and health.
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Research Associate University of Bristol
Sarah is a Research Associate at the IFS and Head of the Department of Economics at the University of Bristol with interest in applied microeconomics.
Journal article details
- Publisher
- American Economic Association
- Issue
- Volume 88, Issue 4, September 1998, pages 769-788
Suggested citation
J, Banks and R, Blundell and S, Smith. (1998). 'Is there a retirement-savings puzzle?' 88(4/1998), pp.769–788.
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