Why do households reduce consumption after retirement?

Evidence from several countries reveals a substantial drop in household consumption around the age of retirement that is difficult to explain with standard economic models of life-cycle behavior. Using food consumption data from more than 550 households from the Panel Study of Income Dynamics for the years 1979 - 1986 & 1989 - 1992, we find that married couple households decrease their expenditures on both food consumed at home and away from home by about 8 percent following the retirement of the male household head. This result is robust for several alternative definitions of retirement. No significant decrease in consumption is found for single households, either in a sample of males or a pooled sample of single males and females. These results are consistent with a model of marital bargaining in which wives prefer to save more than their husbands to support an expected longer retirement period, and relative control over household decisions is affected by control over market income.