Permanent income hypothesis

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https://en.wikipedia.org/wiki/Permanent_income_hypothesis 

The permanent income hypothesis (PIH) is a model in the field of economics to explain the formation of consumption patterns. It suggests consumption patterns are formed from future expectations and consumption smoothing. The theory was developed by Milton Friedman and published in his A Theory of Consumption Function, published in 1957 and subsequently formalized by Robert Hall in a rational expectations model. Originally applied to consumption and income, the process of future expectations is thought to influence other phenomena. In its simplest form, the hypothesis states changes in permanent income (human capital, property, assets), rather than changes in temporary income (unexpected income), are what drive changes in consumption.

Nobel laureate and inventor of the Permanent Income Hypothesis Milton Friedman

The formation of consumption patterns opposite to predictions was an outstanding problem faced by the Keynesian orthodoxy. Friedman's predictions of consumption smoothing, where people spread out transitory changes in income over time, departed from the traditional Keynesian emphasis on a higher marginal propensity to consume out of current income.

Income consists of a permanent (anticipated and planned) component and a transitory (unexpected and surprising) component. In the permanent income hypothesis model, the key determinant of consumption is an individual's lifetime income, not their current income. Unlike permanent income, transitory incomes are volatile.

Background and history

Until A Theory of Consumption Function, the Keynesian absolute income hypothesis and interpretation of the consumption function were the most advanced and sophisticated. In its post-war synthesis, the Keynesian perspective was responsible for pioneering many innovations in recession management, economic history, and macroeconomics. Like the neoclassical school that preceded it, early inconsistencies had their roots in socio-political events contrary to the predictions put forward.

The introduction of the absolute income hypothesis is often attributed to John Maynard Keynes, a British economist, who wrote several books which are now the basis for Keynesian economics. The hypothesis put forward by Keynes was accepted and placed into the post–war synthesis. However, inconsistencies were not resolved swiftly, and economists were unable to explain the consistency of the savings rate in the face of rising real incomes (Fig. 1).

Relationship between Saving and Consumption Based on Budget Data

United States (USD) Date Consumer Units Avg. Income APC MPC 1881–90 Selected wage-earner families $682 .90 .67 1901 Selected wage-earner normal families $651 .92 .68 1917–19 Selected wage-earner families $1,513 .91 .78 1935–36 Nonrelief nonfarm families $1,952 .89 .73 1935–36 Nonrelief farm families $1,259 .87 .57 1941 Urban families $2,865 .92 .79 1941 Farm families $1,680 .83 .57 1944 Urban families $3,411 .82 .57 1947 Urban families $3,323 .92 .78 1950 Nonfarm families $4,084 .91 .73 1950 Spending units of one or more persons $3,220 .92 .75 Fig. 1: Analysis of consumption and income; taken from Friedman (1957)

Before the neoclassical synthesis was established, Keynes and his hypothesis challenged the orthodoxy of neoclassical economics. As a result of the Great Depression, Keynes rapidly became among the leaders of economic thought. His MPC and MPS spending multipliers developed into the absolute income hypothesis (1), and were influential to the government responses to the ensuing depression.

${\displaystyle C=a+b\cdot Y_d}$

(1)

Origins

The American economist Milton Friedman developed the permanent income hypothesis in his 1957 book A Theory of the Consumption Function. In his book, Friedman posits a theory that explained how and why future expectations change consumption.

Friedman's 1957 book created the basis for consumption smoothing. He argued the consumption model, in which outcomes are stochastic, where consumers face risks and uncertainty to their labor incomes, complicates interpretations of indifference curves, and causes consumers to spread out or 'smooth' their spending based on their permanent income, which represents their anticipated income over their lifetimes. Friedman explain in A Theory of the Consumption Function how consumers interact with money based on not just windfall gains, but through their permanent income because consumers will save when they expect their long term income to rise. He writes:

'Yet from another point of view, the assumption seems highly implausible. Will not a man who receives an unexpected windfall use at least some part of it in "riotous living," i.e. in consumption expenditures? Would he be likely to add the whole of it to his wealth? The answer to these questions depends greatly on how "consumption" is defined. The offhand affirmative answer reflects in large measure, I believe, an implicit definition of consumption in terms of purchases, including durable goods, rather than in terms of the value of services. If the latter definition is adopted, as seems highly desirable in applying the hypothesis to empirical data—though unfortunately I have been able to do so to only a limited extent—much that one classifies offhand as consumption is reclassified as savings. Is not the windfall likely to be used for the purchase of durable goods? Or, to put it differently, is not the timing of the replacement of durable goods and of additions to the stock of such goods likely to some extent to be adjusted so as to coincide with windfalls?'

— A Theory of Consumption Function

Theoretical considerations

In his theory, John Maynard Keynes supported economic policy makers by his argument emphasizing their capability of macroeconomic fine tuning. For Keynes, consumption expenditures are linked to disposable income by a parameter called the marginal propensity to consume (the amount per dollar consumers are willing to spend; ${\displaystyle 1-MPS=MPC}$). Since the marginal propensity to consume itself is a function of income, it is also true that additional increases in disposable income lead to diminishing increases in consumption expenditures. It must be stressed that the relation characterized by substantial stability links current consumption expenditures to current disposable income—and, on these grounds, a considerable leeway is provided for aggregate demand stimulation, since a change in income immediately results in a multiplied shift in aggregate demand (this is the essence of the Keynesian case of the multiplier effect). The same is true of tax cut policies. According to the basic theory of Keynes, governments are always capable of countercyclical fine tuning of macroeconomic systems through demand management, although Friedman disputes this, arguing in a 1961 journal article that Keynesian macroeconomic fine tuning will succumb to 'long and variable lags.'

Model of the consumption function, where a is autonomous consumption, b is the MPC, and Yd is disposable income

The permanent income hypothesis questions this ability of governments. However, it is also true that permanent income theory is concentrated mainly on long run dynamics and relations, while Keynes focused primarily on short run considerations. Friedman's argument, which challenged the use of fiscal policy in smoothing out business cycles, was challenged by stressing the relation between consumption and disposable income still follows (more or less) the mechanism supposed by Keynes.

Friedman starts elaborating his theory under the assumption of complete certainty. Under such circumstances, for Friedman, two motives exist for a consumer unit to spend more or less on consumption than its income: The first is to smooth its consumption expenditures through appropriate timing of borrowing and lending; and the second is either to realize interest earnings on deposits if the relevant rate of interest is positive, or to benefit from borrowing if the interest rate is negative.

According to the PIH, the distribution of consumption across consecutive periods is the result of an optimizing method by which each consumer tries to maximize his utility. At the same time, whatever ratio of income one devotes to consumption in each period, all these consumption expenditures are allocated in the course of an optimization process—that is, consumer units try to optimize not only across periods but within each period.

Calculation of income and consumption

Friedman's 1957 book also made an argument for an entirely new way of calculating income (income is represented by the variable ${\displaystyle y}$) by differentiating between transitory and permanent income (which was also taken to include ordinal elements like human capital and talents). In A Theory of Consumption Function, Friedman develops: ${\displaystyle y=y_p+y_t}$ as a formula. In an earlier study, Friedman, Kuznets (1945), he proposes the idea of transitory and permanent income.

Friedman also developed a consumption formula, ${\displaystyle c=c_p+c_t}$, with ${\displaystyle c_p}$ meaning the permanent component of consumption, with ${\displaystyle c_t}$ being the transitory component. Friedman also drew a distinction between ${\displaystyle y_t}$ and ${\displaystyle c_t}$. Transitory consumption can be interpreted as surprising or unexpected bills, such as a high water bill, or unexpected doctor's visit, which, in Friedman's mind, cannot be spurred by ${\displaystyle y_t}$, because unexpected or 'surprise' consumption is not often financed through windfall gains.

Simple model

Consider a (potentially infinitely lived) consumer who maximizes his expected lifetime utility from the consumption of a stream of goods ${\displaystyle c}$ between periods ${\displaystyle t}$ and ${\displaystyle T}$, as determined by one period utility function ${\displaystyle u(\cdot )}$. In each period ${\displaystyle t}$, he receives an income ${\displaystyle y_t}$, which he can either spend on a consumption good ${\displaystyle c_t}$ or save in the form of an asset ${\displaystyle A_t}$ that pays a constant real interest rate ${\displaystyle r}$ in the next period.

The utility of consumption in future periods is discounted at the rate ${\displaystyle \beta \in (0,1)}$. Finally, let ${\displaystyle {\mathrm{E}}_t[\cdot ]}$ denote the expected value conditional on the information available in period ${\displaystyle t}$. Formally, the consumer's problem is then

${\displaystyle \underset{\{c_k{\}}_{k=t}^T}{max}{\mathrm{E}}_t\sum _{k=0}^{T-t}{\beta }^{k}u(c_{t+k})}$

subject to

${\displaystyle A_{t+1}=(1+r)(A_t+y_t-c_t).}$

Assuming the utility function is quadratic, and that ${\displaystyle (1+r)\beta =1}$, the optimal consumption choice of the consumer is governed by the Euler equation

${\displaystyle c_t={\mathrm{E}}_t[c_{t+1}].}$

Given a finite time horizon of length ${\displaystyle T-t}$, we set ${\displaystyle A_{T+1}=0}$ with the understanding the consumer spends all his wealth by the end of the last period. Solving the consumer's budget constraint forward to the last period, we determine the consumption function is given by

${\displaystyle c_t=\frac{r}{(1+r)-(1+r{)}^{-(T-t)}}\left[A_t+\sum _{k=0}^{T-t}{\left(\frac{1}{1+r}\right)}^k{\mathrm{E}}_t[y_{t+k}]\right].}$

(2)

Over an infinite time horizon, we instead impose a no Ponzi game condition, which prevents the consumer from continuously borrowing and rolling over their debt to future periods, by requiring

${\displaystyle \underset{t\to \mathrm{\infty }}{lim}{\left(\frac{1}{1+r}\right)}^t{A}_t=0.}$

The resulting consumption function is then

${\displaystyle c_t=\frac{r}{1+r}\left[A_t+\sum _{k=0}^{\mathrm{\infty }}{\left(\frac{1}{1+r}\right)}^k{\mathrm{E}}_t[y_{t+k}]\right].}$

(3)

Both expressions (2) and (3) capture the essence of the permanent income hypothesis: current consumption is determined by a combination of current non human wealth ${\displaystyle A_t}$ and human capital wealth ${\displaystyle y_t}$. The fraction of total wealth consumed today further depends on the interest rate ${\displaystyle r}$ and the length of the time horizon over which the consumer is optimizing.

Liquidity constraints

Some have attempted to improve Friedman's original hypothesis by including liquidity constraints, most notably Christopher D. Carroll.

Empirical evidence

Observations, recorded from 1888 to 1941, of stagnant average propensity to consume in the face of rising real incomes provide strong evidence for the existence of the permanent income hypothesis. An early test of the permanent income hypothesis was reported by Robert Hall in 1978, and, assuming rational expectations, finds consumption follows a martingale sequence. Hall & Mishkin (1982) analyze data from 2,000 households and find consumption responds much more strongly to permanent than to transitory movements of income, and reinforce the compatibility of the PIH with 80% of households in the sample. Bernanke (1984) finds 'no evidence against the permanent income hypothesis' when looking at data on automobile consumption.

Median American household spending

In contrast, Flavin (1981) finds consumption is very sensitive to transitory income shocks ('excess sensitivity'), while Mankiw & Shapiro (1985) dispute these findings, arguing that Flavin's test specification (which assumes income is stationary) is biased towards finding excess sensitivity.

Souleles (1999) uses income tax refunds to test the PIH. Since a refund depends on income in the previous year, it is predictable income and should thus not alter consumption in the year of its receipt. The evidence finds that consumption is sensitive to the income refund, with a marginal propensity to consume between 35 and 60%. Stephens (2003) finds the consumption patterns of social security recipients in the United States is not well explained by the permanent income hypothesis.

Stafford (1974) argues that Friedman's explanation cannot account for market failures such as liquidity constraints. Carroll (1997) and Carroll (2001) dispute this, and adjust the model for limits on borrowing. A comprehensive analysis of 3000 tests of the hypothesis provides another explanation. It argues that rejections of the hypothesis are based on publication bias and that after correction, it is consistent with data.

Policy implications

According to Costas Meghir, unresolved inconsistencies explain the failure of transitory Keynesian demand management techniques to achieve its policy targets. In a simple Keynesian framework the marginal propensity to consume (MPC) is assumed constant, and so temporary tax cuts can have a large stimulating effect on demand. Shapiro & Slemrod (2003) find that consumers spread tax rebates over their temporal horizon.

Reception

Criticism

Some critics of the permanent income hypothesis, such as Frank Stafford, have criticized the permanent income hypothesis for its lack of liquidity constraints. However, some studies have adapted the hypothesis for certain circumstances and found that the permanent income hypothesis is compatible with liquidity constraints and other market failures unaccounted for in the original hypothesis.

Alvarez-Cuadrado & Van Long (2011) argue that more affluent consumers save more of their permanent incomes, against what would be expected given the permanent income hypothesis.

Praise

Friedman received the 1976 Sveriges Riksbank prize in Economic Sciences in Memory of Alfred Nobel 'For his achievements in the field of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.' The 'consumption analysis' has been interpreted by Worek (2010) as representing Friedman's contributions in the form of the permanent income hypothesis, while the monetary history and stabilization section has been interpreted to refer to his work on monetary policy and history, and monetarism, which seeks to stabilize a currency, preventing erratic swings, respectively.

The Permanent Income Hypothesis has been met with praise from Austrian economists, such as Robert Mulligan.

Consumption (economics)

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Consumption_(economics)

People buying home electronics at a shopping mall in Jakarta, Indonesia

Consumption is the act of using resources to satisfy current needs and wants. It is seen in contrast to investing, which is spending for acquisition of future income. Consumption is a major concept in economics and is also studied in many other social sciences.

Different schools of economists define consumption differently. According to mainstream economists, only the final purchase of newly produced goods and services by individuals for immediate use constitutes consumption, while other types of expenditure — in particular, fixed investment, intermediate consumption, and government spending — are placed in separate categories (see consumer choice). Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services (e.g., the selection, adoption, use, disposal and recycling of goods and services).

Economists are particularly interested in the relationship between consumption and income, as modelled with the consumption function. A similar realist structural view can be found in consumption theory, which views the Fisherian intertemporal choice framework as the real structure of the consumption function. Unlike the passive strategy of structure embodied in inductive structural realism, economists define structure in terms of its invariance under intervention.

Behavioural economics, Keynesian consumption function

Main article: Consumption function

The Keynesian consumption function is also known as the absolute income hypothesis, as it only bases consumption on current income and ignores potential future income (or lack of). Criticism of this assumption led to the development of Milton Friedman's permanent income hypothesis and Franco Modigliani's life cycle hypothesis.

More recent theoretical approaches are based on behavioural economics and suggest that a number of behavioural principles can be taken as microeconomic foundations for a behaviourally-based aggregate consumption function.

Behavioural economics also adopts and explains several human behavioural traits within the constraint of the standard economic model. These include bounded rationality, bounded willpower, and bounded selfishness.

Bounded rationality was first proposed by Herbert Simon. This means that people sometimes respond rationally to their own cognitive limits, which aimed to minimize the sum of the costs of decision making and the costs of error. In addition, bounded willpower refers to the fact that people often take actions that they know are in conflict with their long-term interests. For example, most smokers would rather not smoke, and many smokers willing to pay for a drug or a program to help them quit. Finally, bounded self-interest refers to an essential fact about the utility function of a large part of people: under certain circumstances, they care about others or act as if they care about others, even strangers.

Consumption and household production

Aggregate consumption is a component of aggregate demand.

Consumption is defined in part by comparison to production. In the tradition of the Columbia School of Household Economics, also known as the New Home Economics, commercial consumption has to be analyzed in the context of household production. The opportunity cost of time affects the cost of home-produced substitutes and therefore demand for commercial goods and services. The elasticity of demand for consumption goods is also a function of who performs chores in households and how their spouses compensate them for opportunity costs of home production.

Different schools of economists define production and consumption differently. According to mainstream economists, only the final purchase of goods and services by individuals constitutes consumption, while other types of expenditure — in particular, fixed investment, intermediate consumption, and government spending — are placed in separate categories (See consumer choice). Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services (e.g., the selection, adoption, use, disposal and recycling of goods and services).

Consumption can also be measured in a variety of different ways such as energy in energy economics metrics.

Consumption as part of GDP

GDP (Gross domestic product) is defined via this formula:

${\displaystyle Y=C+G+I+NX}$

Where ${\displaystyle C}$ stands for consumption.

Where ${\displaystyle G}$ stands for total government spending. (including salaries)

Where ${\displaystyle I}$ stands for Investments.

Where ${\displaystyle NX}$ stands for net exports. Net exports are exports minus imports.

In most countries consumption is the most important part of GDP. It usually ranges from 45% from GDP to 85% of GDP.

Consumption in microeconomics

In microeconomics, consumer choice is a theory that assumes that people are rational consumers and they decide on what combinations of goods to buy based on their utility function (which goods provide them with more use/happiness) and their budget constraint (which combinations of goods they can afford to buy). Consumers try to maximize utility while staying within the limits of their budget constrain or to minimalize cost while getting the target level of utility. A special case of this is the consumption-leisure model where a consumer chooses between a combination of leisure and working time, which is represented by income.

However, behavioural economics shows that consumers do not behave rationally and they are influenced by factors other than their utility from the given good. Those factors can be the popularity of a given good or its position in a supermarket.

Consumption in macroeconomics

In macroeconomics in the theory of national accounts consumption is not only the amount of money that is spent by households on goods and services from companies. But also the expenditures of government that are meant to provide things for citizens they would have to buy themselves otherwise. This means things like healthcare. Where consumption is equal to income minus savings. Consumption can be calculated via this formula:

${\displaystyle C=C_0+c\ast Y_d}$

Where ${\displaystyle C_0}$ stands for autonomous consumption which is minimal consumption of household that is achieved always, by either reducing the savings of household or by borrowing money.

${\displaystyle c}$ is marginal propensity to consume where ${\displaystyle c\in [0,1]}$ and it reveals how much of household income is spent on consumption.

${\displaystyle Y_d}$ is the disposable income of the household.

Consumption as a measurement of growth

Consumption of electric energy is positively correlated with economical growth. As electric energy is one of the most important inputs of the economy. Electric energy is needed to produce goods and to provide services to consumers. There is a statistically significant effect of electrical energy consumption and economic growth that is positive. Electricity consumption reflects economic growth. With the gradual rise of people's material level, electric energy consumption is also gradually increasing. In Iran, for example, electricity consumption has increased along with economic growth since 1970. But as countries continue to develop this effect is decreasing as they optimize their production, by getting more energy-efficient equipment. Or by transferring parts of their production to foreign nations where the cost of electrical energy is smaller.

 

Determinant factors of consumption

The main factors affecting consumption studied by economists include:

Income: Economists consider the income level to be the most crucial factor affecting consumption. Therefore, the offered consumption functions often emphasize this variable. Keynes considers absolute income, Dosnbery considers relative income, and Friedman considers permanent income as factors that determine one's consumption.

Consumer expectations: Changes in the prices would change the real income and purchasing power of the consumer. If the consumer's expectations about future prices change, it can change his consumption decisions in the present period.

Consumer assets and wealth: These refer to assets in the form of cash, bank deposits, securities, as well as physical assets such as stocks of durable goods or real estate such as houses, land, etc. These factors can affect consumption; if the mentioned assets are sufficiently liquid, they will remain in reserve and can be used in emergencies.

Consumer credits: The increase in the consumer's credit and his credit transactions can allow the consumer to use his future income at present. As a result, it can lead to more consumption expenditure compared to the case that the only purchasing power is current income.

Interest rate: Fluctuations in interest rates can affect household consumption decisions. An increase in interest rates increases people's savings and, as a result, reduces their consumption expenditures.

Household size: Households' absolute consumption costs increase as the number of family members increases. Although for some goods, as the number of households increases, the consumption of such goods would increase relatively less than the number of households. This happens due to the phenomena of the economy of scale.

Social groups: Household consumption varies in different social groups. For example, the consumption pattern of employers is different from the consumption pattern of workers. The smaller the gap between groups in a society, the more homogeneous consumption pattern within the society.

Consumer taste: One of the important factors in shaping the consumption pattern is consumer taste. This factor, to some extent, can affect other factors such as income and price levels. On the other hand, society's culture has a significant impact on shaping the tastes of consumers.

Area: Consumption patterns are different in different geographical regions. For example, this pattern differs from urban and rural areas, crowded and sparsely populated areas, economically active and inactive areas, etc.

Consumption theories

Consumption theories began with John Maynard Keynes in 1936 and were developed by economists such as Friedman, Dusenbery, and Modigliani. The relationship between consumption and income was a crucial concept in macroeconomic analysis for a long time.

Absolute Income Hypothesis

In his 1936 General Theory, Keynes introduced the consumption function. He believed that various factors influence consumption decisions; But in the short run, the most important factor is real income. According to the Absolute Income Hypothesis, consumer spending on consumption goods and services is a linear function of his current disposable income.

Relative Income Hypothesis

James Dusenbery proposed this model in 1949. This theory is based on two assumptions: 1- People's consumption behavior is not independent of each other. In other words, two people with the same income that live in two different positions within the income distribution will have different consumptions. In fact, one compares oneself with other people, and what has a significant impact on one's consumption is one's position among individuals and groups in society; Therefore, a person only feels an improvement in his situation in terms of consumption if his average consumption increases relative to the average level of society. This phenomenon is called the Demonstration Effect. 2- Consumer behavior over time is irreversible. This means that when income declines, consumer spending is sticky to the former level. After getting used to a level of consumption, a person shows resistance to reducing it and is unwilling to reduce that level of consumption. This phenomenon is called the ratchet effect.

Intertemporal consumption

The model of intertemporal consumption was first thought of by John Rae in 1830s and it was later expanded by Irving Fisher in 1930s in the book Theory of interest. This model describes how consumption is distributed over periods of life. In the basic model with 2 periods for example young and old age.

${\displaystyle S_1=Y_1-C_1}$

And then

${\displaystyle C_2=Y_2+S_1\times (1+r)}$

Where ${\displaystyle C}$ is the consumption in a given year.

Where ${\displaystyle Y}$ is the income received in a given year.

Where ${\displaystyle S}$ are saving from a given year.

Where ${\displaystyle r}$ is the interest rate.

Indexes 1,2 stand for period 1 and period 2.

This model can be expanded to represent each year of a lifetime.

Permanent income hypothesis

Is an economical theory developed by Milton Friedman in 1950s in his book A theory of Consumption Function. This theory divides income into two components ${\displaystyle Y_t}$ is transitory income and ${\displaystyle Y_p}$is permanent income. Where${\displaystyle Y=Y_t+Y_p}$ holds.

Based on changes of income consumption changes as well, but in this theory, it meters which component of income changes. If ${\displaystyle Y_p}$ changes then consumption changes accordingly by ${\displaystyle \alpha \times Y_p}$. Where ${\displaystyle \alpha }$ is marginal propensity to consume. (If we expect part of income to be saved or invested otherwise ${\displaystyle \alpha =1}$). On the other hand, if ${\displaystyle Y_t}$ changes (for example winning lottery). Then this increase in income is distributed over the remaining life span. For example, winning $1000 with the expectation of living for 10 more years. Will result in yearly increase of consumption by $100. 

Life-cycle hypothesis

The life-cycle hypothesis was published by Franco Modigliani in 1966. It describes how people make consumption decisions based on their past income, current income, and future income as they tend to distribute their consumption over their lifetime. It is, in its basic form:

${\displaystyle C=1/T\times W+1/T\times (R\times Y)}$

Where ${\displaystyle C}$ is the consumption in given year.

Where ${\displaystyle T}$ is the number of years the individual is going to live for.

Where ${\displaystyle R}$ is for how many more years will the individual be working.

Where ${\displaystyle Y}$ is the average wage the individual will be paid over his or her remaining work time

And ${\displaystyle W}$ is the wealth he has already accumulated in his or her life.

Old-age spending

Spending the Kids' Inheritance (originally the title of a book on the subject by Annie Hulley) and the acronyms SKI and SKI'ing refer to the growing number of older people in Western society spending their money on travel, cars and property, in contrast to previous generations who tended to leave that money to their children. According to a study from 2017 that was conducted in the USA 20% of married people consider leaving inheritance a priority, while 34% do not consider it as a priority. And about one in ten unmarried Americans (14 percent) plan to spend their retirement money to improve their lives, rather than saving it to leave an inheritance to their children. In addition, three in ten married Americans (28 percent) have downsized or plan to downsize their home after retirement.

Die Broke (from the book Die Broke: A Radical Four-Part Financial Plan by Stephen Pollan and Mark Levine) is a similar idea.