Abstract
This paper uses a detailed panel of individual spending, income, account balances, and credit limits from a personal finance management software provider to investigate how expenditures, liquid savings, and consumer debt change around retirement. The longitudinal nature of our data allows us to estimate individual fixed-effects regressions and thereby control for all selection on time-invariant (un)observables. We provide new evidence on the retirement-consumption puzzle and on whether individuals save adequately for retirement. We find that, upon retirement, individuals reduce their spending in both work-related and leisure categories. However, we feel that it is difficult to tell conclusively whether expenses are work related or not, even with the best data. We thus look at household finances and find that individuals delever upon retirement by reducing consumer debt and increasing liquid savings. We argue that these findings are difficult to rationalize via, for example, work-related expenses. A rational agent would save before retirement because of the expected fall in income, and dissave after retirement, rather than the exact opposite.
Original language | English |
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Publication date | 2019 |
Number of pages | 51 |
Publication status | Published - 2019 |
Event | The 79th Annual Meeting of American Finance Association. AFA 2019 - Hilton Atlanta, Atlanta, United States Duration: 4 Jan 2019 → 6 Jan 2019 Conference number: 79 https://editorialexpress.com/conference/AFA2019/program/AFA2019.html |
Conference
Conference | The 79th Annual Meeting of American Finance Association. AFA 2019 |
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Number | 79 |
Location | Hilton Atlanta |
Country/Territory | United States |
City | Atlanta |
Period | 04/01/2019 → 06/01/2019 |
Internet address |
Keywords
- Retirement
- Consumption
- Savings
- Consumer debt