Spending as We Age

[Brett_Cameron]

Here is an interesting page published by the SSA:
Expenditures of the Aged Chartbook, 2010

It provides statistical results of spending by age group.

Expenditure amounts varied by age. This section of the chartbook examines three age groups: 55–64, 65–74, and 75 or older. Median expenditures for CUs aged 55–64 ($37,580) were 73 percent higher than those of CUs aged 75 or older ($21,654). For CUs aged 55–64, 25th and 75th percentile expenditures were $23,336 and $59,337, respectively; the corresponding values for CUs aged 75 or older were $14,577 and $35,787. Per capita expenditures followed the same pattern.

This is consistent with previous posts about spending dropping as we age.

 

[rodi]

Now I have a new title for myself...

In addition to being a mom, wife, engineer, volunteer, sister.... I'm a "consumer unit".

I feel very special.

 

[Midpack]

This is consistent with previous posts about spending dropping as we age.

While spending less with age due to mobility makes sense, I always wonder if decreased spending with age is also due to

a) lower portfolio value, more fear of running out, saving for LTC and/or
b) not planning well enough for inflation, overly optimistic returns, real returns.​

Probably all three in many cases?

 

[W2R]

But of course, we are individuals and not just statistics. So, I plan to spend MORE when I get to 75, personally. I am going to get every bit of technology that can help me with my (probably?) declining vision and other physical incapabilities that are commonly associated with aging. Sure, growing older can be a drag, but I plan to console myself with a shower of delightful goodies.

Not only that, I plan to be able to afford every one of the medications that my doctors prescribe, AND eat, AND pay my utility bills, despite inflation. woo- hoo...

 

[imoldernu]

I'm not smart enough to figure out what a Consumer Unit is.

Perhaps, especially since the statistics involve $$$ (Dollars) someone here can explain whether the numbers quoted are for a person, two persons, a family of two or more, or perhaps roomate? Best I can figure is that I am 1.9 CU's. but that would make DW and I, 2.8 CU's, and if you are age 55, you are 2.2 CU's... Or maybe, I am only .95 of a CU, whereas you would be 1.1CU....
Or, what if DW and I were living apart, and she were 55, would we then be 3.0CU's?

Link to definitions here:
Expenditures of the Aged Chartbook, 2010

Thanking you ...in advance...

In truth, (over 75) we spend less because we eat less, don't travel as much, don't need new cars, don't go out for entertainment often, and already have most of the household goods, clothes, and "stuff" that we used to spend money on. Medicare keeps our healthcare expenses stable, and we also have the benefits of senior discounts, homestead exemptions, tax freezes, and other perks that pop up like Silver Sneakers, free transportation etc.

We're at a point in life, where we can afford whatever we want, something we didn't expect, when we started out 24 years ago, and very, very grateful for the time, the health, and the security. A time when "wants" and needs" even out.

Life is good.

 

[REWahoo]

I'm not smart enough to figure out what a Consumer Unit is.

Consumer unit (CU). Expenditures in the Consumer Expenditure Survey are measured for the CU, defined as the members of a household related by blood, marriage, adoption, or some other legal arrangement; a single person living alone or sharing a household with others but who is financially independent; or two or more persons living together who share responsibility for at least two of the following three major expense categories: food, housing, and other (comprising various items, listed below under "Components of expenditures"). Students living in university-sponsored housing also are included in the sample as separate CUs. The Consumer Expenditure Survey is a survey of the noninstitutionalized population and therefore does not include nursing home residents and their expenditures.

Expenditures of the Aged Chartbook, 2010

 

[bondi688]

Now I have a new title for myself...

In addition to being a mom, wife, engineer, volunteer, sister.... I'm a "consumer unit".

I feel very special.

You are also a tax unit, remember that term was used in a study discussed a couple of weeks back.

 

[warren]

I spend more at age 75 than I ever have and I have no intention of reversing that trend until I can't get around anymore.

 

[Midpack]

Since the charts are current data from 2010 interviews, it's not inflation adjusted.

The mean expenditure for the 75 and older group is $31,361.

If you assume 3% inflation, the $50,588 of the 55-64 age group is equivalent to $28,011 for 20 years earlier.

So odds are the 75 and older group in the chart is actually spending more in nominal dollars than they did when they were 55-64, even though the chart makes it appear otherwise. IOW, the 75 and older group is spending about 12% more than they did as 55-64 year olds after discounting for inflation.

 

[imoldernu]

Since the charts are current data from 2010 interviews, it's not inflation adjusted.

The mean expenditure for the 75 and older group is $31,361.

If you assume 3% inflation, the $50,588 of the 55-64 age group is equivalent to $28,011 for 20 years earlier.

So odds are the 75 and older group in the chart is actually spending more in nominal dollars than they did when they were 55-64, even though the chart makes it appear otherwise.

Umm yeah... is that one person, or two, or a household... or a group... or part of a person, or.... maybe just a unit.

Are I a unit?

 

[Midpack]

Umm yeah... is that one person, or two, or a household... or a group... or part of a person, or.... maybe just a unit.

Are I a unit?

I assume you're joking since you linked to the explanations and REW quoted the same. Interestingly, accounting for the different CU's by age group would further flatten out the chart. That and inflation, and the chart might actually end up showing spending/person is about the same for all age groups...

Consumer unit (CU). Expenditures in the Consumer Expenditure Survey are measured for the CU, defined as the members of a household related by blood, marriage, adoption, or some other legal arrangement; a single person living alone or sharing a household with others but who is financially independent; or two or more persons living together who share responsibility for at least two of the following three major expense categories: food, housing, and other (comprising various items, listed below under "Components of expenditures").

The average number of persons in a CU, by age of the unit, was 2.2 for CUs aged 55–64, 1.9 for those aged 65–74, and 1.6 for those 75 or older.

 

[obgyn65]

I would be interested to know if anyone has factored in a drop in expenses in their retirement model as they get older. If yes, by how much and at what age levels ?

 

[Midpack]

I would be interested to know if anyone has factored in a drop in expenses in their retirement model as they get older. If yes, by how much and at what age levels ?

Retirement Researcher Blog: "Reality Retirement Planning: A New Paradigm for an Old Science"

http://golio.net/My_Homepage_Files/Download/RealityRetirementPlanning.pdf

This spending methodology is an option in FIRECALC.

 

[Brett_Cameron]

I have factored in specific changes as I know of now in health insurance premiums, child education costs. These reductions come at various ages of me and my family members. Nominal expenses generally trend upward. Big increases and decreases in expenses are pretty much limited to college costs for DS9 and DS16.
I generally inflate individual expense categories as multiples of assumed cpi of 2.5%.

 

[imoldernu]

I assume you're joking since you linked to the explanations and REW quoted the same. Interestingly, accounting for the different CU's by age group would further flatten out the chart. That and inflation, and the chart might actually end up showing spending/person is about the same for all age groups...

Yeah... exactly.

 

[akck]

I would be interested to know if anyone has factored in a drop in expenses in their retirement model as they get older. If yes, by how much and at what age levels ?

I factor in a drop for mortgage payments once it's paid off. I also changed plans and now have the mortgage going to almost full term because I'm figuring our investment return will be greater than what we're paying on the mortgage. Other than that one item, I've planned for expenses increasing, but I'm guessing we'll spend less as we age. I just can't imagine spending triple digits in my 80's, especially since we'll look for lower cost areas if we move.

 

[Brett_Cameron]

While spending less with age due to mobility makes sense, I always wonder if decreased spending with age is also due to

a) lower portfolio value, more fear of running out, saving for LTC and/or
b) not planning well enough for inflation, overly optimistic returns, real returns.​

Probably all three in many cases?

I agree with you. Another possibility is older persons may have less desire/need for stuff, aside from health care.

 

[Brett_Cameron]

But of course, we are individuals and not just statistics. So, I plan to spend MORE when I get to 75, personally. I am going to get every bit of technology that can help me with my (probably?) declining vision and other physical incapabilities that are commonly associated with aging. Sure, growing older can be a drag, but I plan to console myself with a shower of delightful goodies.

Not only that, I plan to be able to afford every one of the medications that my doctors prescribe, AND eat, AND pay my utility bills, despite inflation. woo- hoo...

me, too!

 

[LitGal]

Will Not....

buy much more stuff, only to have to get rid of it when we downsize.

But DO plan to travel, go to concerts and the theatre until oblivion.....

(We'll track expenses to make sure all the bills get properly paid; otherwise, life experiences are paramount.)

 

[sengsational]

While spending less with age due to mobility makes sense, I always wonder if decreased spending with age is also due to

a) lower portfolio value, more fear of running out, saving for LTC and/or
b) not planning well enough for inflation, overly optimistic returns, real returns.​

Probably all three in many cases?

That was my first thought when I heard about the lower spending over time statistics. But yours is the first I've seen to question it in this way. Not that I've done much digging (who wants to work on researching that, only to be proven right?).

--Dale--

 

[Live And Learn]

I would be interested to know if anyone has factored in a drop in expenses in their retirement model as they get older. If yes, by how much and at what age levels ?

Other than healthcare due to Medicare I've assumed that I will spend the same amount as I'm assuming that new expense categories (increased medication costs, cleaning and handyman services as I become less able to do this myself) will be funded out of what I am now budgeting for discretionary spending. My budget already includes a downsized house with no mortgage which is probably another piece of the "spending declines with age" for the "average" CU.