Date of Award

6-2014

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Younghwan Song

Language

English

Keywords

retirement, well-being, consumption, satisfaction

Abstract

Using cross-sectional data from the Behavioral Risk Factor Surveillance System and the American Time Use Survey Well-Being Module, this paper looks at how retirement affects one’s subjective well-being. The retirement-consumption puzzle indicates that at retirement individuals discover they have fewer economic resources than they had anticipated prior to retirement. As a consequence they reduce consumption, which contradicts the prediction of consumption smoothing based on the life-cycle model of consumption. But at the same time people have more time for leisure and home production after retirement. How does this tradeoff between consumption and leisure after retirement affect an individual’s subjective well-being, such as life satisfaction, U-index, net affect, and meaningfulness? This paper controls for age, race, education, marital status, and income in analyzing an individual’s subjective well-being before and after retirement. I find that retirement has a negative effect on one’s subjective well-being. However, after correcting for endogeneity of retirement, it turns out that retirement actually does not affect one’s subjective well-being.

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