NCPA - National Center for Policy Analysis

How Are Seniors Spending Their Money?

January 22, 2014

Just 20 years ago, most seniors entered retirement debt-free. Now, experts wonder if retirees will able to make ends meet throughout the rest of their lives, much less not outlive their money, says Pamela Villarreal, a senior fellow with the National Center for Policy Analysis.

How have spending patterns changed for today's seniors compared to years past? Using data from the Bureau of Labor Statistics' Consumer Expenditure Survey and the Federal Reserve Survey of Consumer Finances, one can compare the spending habits of today's seniors with the spending habits of those who retired 20 or more years ago.

  • More seniors carry mortgages and spend a greater share on interest payments.
  • The Survey of Consumer Finances shows that since 1989, the percentage of 65 to 74 year olds reporting a mortgage or home equity loan holders increased from 21 percent to nearly 37 percent in 2010.
  • For seniors 75 years old and older, the percent of mortgage or home equity loan payments increased from just 6 percent to 21 percent during the same time.

Moreover, a greater share of seniors' total expenditures are for mortgage or home equity loan interest. Health care expenditures are substantial, but not one of the fastest-growing expenditure shares.

Seniors expenditures increasingly reflect their hobbies. For 65 to 74 year olds, for instance, two of the top five fastest-growing expenditure categories are:

  • Miscellaneous entertainment, which has grown an average of 9.8 percent annually since 1990. This category includes exercise equipment, photography equipment, campers, boats and other motorized recreational vehicles, and electronic video games.
  • Pets and hobbies, which has averaged 5.8 percent growth annually since 1990. This category not only includes expenses for pets and pet supplies, but also toys, games, tricycles and playground equipment.

Seniors are also spending more on cars and education. In addition, seniors have more credit card debt than before. The Survey of Consumer Finances reports:

  • The average credit card balance for 65 to 74 year olds in 2010 was $6,000, compared to just $2,100 in 1989.
  • For those 75 years old or more, the average balance was not even measurable in 1989 but had ballooned to $4,600 by 2010.

But in terms of amount of net worth and the distribution of wealth, seniors do well compared to other age groups.

Source: Pamela Villarreal, "How Are Seniors Spending Their Money?" National Center for Policy Analysis, January 2014.


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