Geographic Variation in Spending Among Older American Households

EBRI, Vol. 38, No. 2, February 21, 2017

12 Pages Posted: 28 Feb 2017 Last revised: 2 Mar 2017

See all articles by Sudipto Banerjee

Sudipto Banerjee

Employee Benefit Research Institute (EBRI)

Date Written: February 21, 2017

Abstract

This paper reports on a study of how spending in older American households (ages 50 and above) varies across different census regions and divisions. The study shows large variations in household spending across the country, suggesting that both individual households and financial firms might benefit from using state- or region-specific spending benchmarks, in addition to national spending benchmarks. There are significant differences in spending levels across different census regions, but the differences are much larger among census divisions, which are smaller geographic units. Among 65-to-74-year-olds living in different census regions, Northeastern households had the highest median annual spending ($41,860), compared with the lowest by Southern households ($32,836). Among the different census divisions, New England households (CT, RI, MA, VT, NH, and ME) ages 65 to 74 spent the most (median annual spending of $46,019), while households in that age group in the West South Central division (TX, OK, AR, and LA) spent the least ($28,540). Since housing and housing-related expenses form a large part of total household expenses, geographic differences in housing and housing-related expenses are consistent with total spending differences. For example, New England households between ages 50 and 64 spent more than 2.5 times more ($30,240 annually) on housing and housing-related expenses than those in the southern states of TX, OK, AR, and LA ($11,948). Geographic differences in health care spending do not follow the pattern of total spending or housing-related spending. For example, Midwestern states have much higher health care expenses than other regions for those ages 75 and above and non-institutionalized. Among those ages 85 and above, the median annual spending among Midwesterners was $3,480, which was 41.5 percent higher than the median ($2,460) in the next-highest spending region (the West). National spending benchmarks show that average household spending declined with age. In 2015, average total annual spending for households between ages 50 and 64 was $53,087, which declined to $34,982 for those ages 85 and above. Median spending levels for the same age groups were $42,235 and $26,497, respectively. Housing and housing-related expenses remained the largest spending category for all age groups above 50, varying between 44 percent and 48 percent of total household spending for different age groups.

Keywords: Aged, Consumption, Health Care Spending, Household Expenditure, Housing, Spending

JEL Classification: D12, E21, J11, J14, J26

Suggested Citation

Banerjee, Sudipto, Geographic Variation in Spending Among Older American Households (February 21, 2017). EBRI, Vol. 38, No. 2, February 21, 2017, Available at SSRN: https://ssrn.com/abstract=2924678

Sudipto Banerjee (Contact Author)

Employee Benefit Research Institute (EBRI) ( email )

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