Do retirees want constant, increasing, or decreasing consumption?

Abstract

Whether households prefer a constant, increasing, or decreasing path of consumption in retirement has important implications for our understanding of retirement adequacy. Financial planners and researchers have often assumed that retirees would like to maintain their pre-retirement standard of living. However, several studies suggest that retired households decrease their consumption over time. This project builds on the existing literature by: 1) examining retirement consumption over longer periods; 2) using wealth to separate constrained and unconstrained households in order to analyze whether declines in consumption are driven by necessity or preferences; and 3) exploring whether, within unconstrained households, those with steeper mortality profiles are more likely to front-load consumption.