Employees’ Emotional, Evidence of Behavioural Life- Cycle Features in Spending Patterns after Retirement

Using data from a survey experiment on the decumulation of pension wealth after retirement, we estimate a stylized structural life-cycle model incorporating several behavioural features. In the experiment, pension income is in the form of a constant annuity, a \high-low” annuity that falls from a higher to a lower level five years into retirement, or a \low-high” annuity that does the reverse. This creates variation in liquid and illiquid wealth. Respondents are asked to choose among several expenditure patterns in the first ten years after retirement. We find that the respondents do not behave in the way the standard life-cycle model would predict. They respond to the variation in how they receive their income, and strongly undervalue illiquid wealth compared to liquid wealth at the ten years time horizon. Moreover, they have a tendency to follow the rule of thumb of going for the middle choice alternative.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


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