How has the financial crisis affected the consumption of retirees?

Abstract

The brief's key findings are: (1) The impact of the financial crisis on the consumption of retirees depends on how much they have in financial assets, how they invest, and their reliance on assets for consumption. (2) The crisis had little effect on those 40 percent with very small amounts of financial assets and the top 5 percent with very large amounts. (3) In contrast, the broad middle class did experience declines in consumption: (3a) At one extreme, households that invested in short-term deposits and tried to live off the interest saw significant declines. (3b) At the other extreme, investors in balanced portfolios who gradually drew down their wealth lost more modest amounts. (4) Most middle-class households, though, combine some behavioral aspects from the two extremes, so the impact on their consumption lies in between.