Housing Costs Never Really Go Down for Clients

Data from the Bureau of Labor Statistics shows housing is the “greatest expense in dollar amount and as a share of total expenditures for households with a reference person 55 and older.”

This finding is reported in a new Beyond the Numbers blog post, which includes some interesting and extensive charts on the ways older Americans spend their dough. Matching volumes of other research published by industry providers and academics alike, the blog post projects that the aging of the United States population will influence the economy in many ways for many years to come.

According to the blog, age 55 is an important reference point for thinking about the way the U.S. population spends and saves: “Age 55 was chosen because the article focuses on spending changes that occur as household members age and transition to retirement,” with one’s 55th birthday kicking off the last decade of quality prep time before the typical retirement age of 65.

In 2014, older households with a reference person at least 55-years old made up 41.5% of the sample of the Bureau’s Consumer Expenditure (CE) Survey, compared with 37.5% in 2009 and 34.6% in 2004, reflecting the aging of the U.S. population. For the population as a whole, annual pre-tax income was $58,528, the blog post explains. Pre-tax income was $75,241 for households with a reference person 55- to 64-years old, declining to $35,467 for households with a reference person 75 and older.

While housing expenditures do decrease somewhat in dollar terms as a person ages ($18,006 per year for the 55 to 64 age group, declining to $15,838 for the 65 to 74 group and $13,375 for the 75-and-older group)  they remain a significant expense throughout one’s latter years. When weighed against income, one can see that the oldest actually pay the most on housing relative to the amount of money coming in.

At the mean, the numbers imply that the typical retiree is directing more than one-third of annual income to meet housing costs, compared with between 8% and 16% on health care, depending on exactly how old the individual is.

“Housing was the greatest expense in average dollar amount and as a share of the household budget for older households,” the blog concludes. “Housing expenses declined with the age of the reference person and accompanying increase in the proportion of households without mortgage debt. Whether this pattern will continue is unclear. One explanation is that data from the Survey of Consumer Finances show that the proportion of families with heads ages 55 or older with housing debt increased steadily from 24% in 1992 to 42% in 2010. The increase was more pronounced for families with heads ages 65 to 74 and 75 and older.”