Pension Planning and Household Consumption: Theory and Evidence

“Old-age support” is not only a fundamental need for the elderly but also a crucial expectation for those not yet old. Therefore, retirement planning is inevitably an important variable in the welfare function at the household level. Existing literature often treats pensions as predetermined benefits, overlooking the potential impact of residents’ proactive planning on household consumption. This paper categorizes residents’ retirement planning into familial old-age planning, social old-age planning, and self-old-age planning. By constructing a three-period overlapping generations (OLG) model, it theoretically analyzes the impact of residents’ retirement financial planning on household consumption levels and empirically tests this using data from the China Household Finance Survey (CHFS). The study demonstrates that different types of retirement planning have varying effects on household consumption: familial old-age planning suppresses household consumption through bequest motives, social old-age planning promotes household consumption via job stability and precautionary saving motives, while self-old-age planning fosters household consumption through risky financial asset investments and the effectiveness of asset allocation. Heterogeneity analysis reveals that in households with closer family ties, the suppressive effect of familial old-age planning on consumption is more pronounced; in households with lower human capital and those in rural areas, the promotional effect of social old-age planning on consumption is more significant; and in households without liquidity constraints, the promotional effect of self-old-age planning on consumption is more evident. The findings of this paper provide Chinese marginal micro-evidence for consumption theory under the overlapping generations framework and offer academic insights into how to unleash consumption potential against the backdrop of population aging.