The life-cycle hypothesis suggests that, as individuals grow older, they reduce their expectations of life-time income, mainly because their expected time in the labor force is decreasing.

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The life-cycle hypothesis posits that individuals plan their consumption and savings behavior over their lifetime, taking into account their expected lifetime income. As they age, they anticipate a shorter remaining time in the labor force, which can lead to a reduction in their expected lifetime income.

The Life-Cycle Hypothesis Suggests That, as Individuals Grow Older, They