![]() ![]() We find evidence of reductions in both work-related and leisure spending categories. The data allow us to analyse changes in individual spending, interest payments, and financial account balances upon retirement by comparing the same person before and after retirement. Moreover, to the best of our knowledge, this paper is the first to document changes in personal finances, that is, liquid savings and consumer debt, around retirement. ![]() In a recent paper (Olafsson and Pagel 2018), we revisit the retirement-consumption puzzle and contribute to this debate using new, accurate, and comprehensive data on spending, income, consumer debt, and liquid savings from personal finance management software.1The accurate spending data, covering more than six years, offers a unique opportunity to re-evaluate the puzzle. Re-evaluating the retirement-consumpion puzzle So the mechanism for the drop in spending upon retirement is still debated, as is the broader question of whether individuals save adequately for retirement and plan properly. They argue that spending, rather than consumption, decreases on the grounds that individuals reduce their work-related expenses and overall spending through more efficient shopping and household production, as a result of having more free time after retirement. Aguiar and Hurst (2005), Aguiar and Hurst (2013) and Hurst (2008) strongly question the claim that there is a decline in actual consumption at retirement. It is puzzling to economists why households do not plan properly and save enough for an expected fall in income.īut other studies argued that this drop in consumption at retirement is actually not puzzling. 2001, Haider and Stephens 2007 and Schwerdt 2005) found a sharp decline in consumption during the first years of retirement, a phenomenon referred to as the ‘retirement-consumption puzzle’. However, a number of empirical studies (e.g. Retirement is arguably among the most predictable and important income changes individuals encounter in their lives, and consumption should not be affected by its onset if households plan properly and save enough. This literature asks whether households plan properly and save enough to have roughly the same level of consumption after as before their retirement. After all, household consumption is the most important part of aggregate demand and the increase in the share of the workforce that will be approaching or past retirement age in the coming years puts this topic at centerstage for both policymakers and researchers. The last key point in Malinowski’s explanation was that humans are solely dependent on the physical world to survive.A large academic literature in economics analyses changes in household consumption upon retirement. In order to satisfy each human needs proposed, corresponding practice such as food-gathering techniques, kinship, shelter, etc are essential. He proposed them to be nourishment, reproduction, bodily comforts, safety, movement, growth, and health. Malinowski said that basic human needs could be biological or psychological. He believed that every social practice a society had was done to support the basic human needs. This explanation comes from the work done by Bronislaw Malinowski. ![]() One approach they have taken to try and understand these patters is the Internal Explanation. However, for the few anthropologists who did look at consumption across different cultures, they found distinct patterns in the way humans consume. Both of these, they thought, weren’t likely to reveal any interesting patterns. The reasons for consumption are simple: either people need something-food and drink-or they want something-like material possessions. Even though this consumption of goods is the main drive of economy, it may not be in anthropologists' best interest to study it. Anthropologists have typically dismissed the study of consumption saying that there are no interesting questions to be asked about it. At a minimum these goods are food, drink, clothing, and shelter. \)Ĭonsumption is usually referred to as the using up of material goods, and materials necessary for human survival. ![]()
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