The Retirement-Consumption Puzzle and Involuntary Early Retirement: Evidence from the British Household Panel Survey*

Abstract

This article uses data from the British Household Panel Survey (BHPS) to shed further light on the fall in consumption at retirement (the ‘retirement-consumption puzzle’). Comparing food spending of men retiring involuntarily early (through ill health or redundancy) with spending of men who retire voluntarily, it finds a significant fall in spending only for those who retire involuntarily. This is consistent with the observed fall in spending being linked to a negative wealth shock for some retirees.