Expenditure Patterns of Older Adults

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  • 0:02 Predicting Expenditure…
  • 0:58 Why Look at Expenditures?
  • 2:06 Older Working Adults
  • 3:24 Non-Working Older Adults
  • 4:43 Lesson Summary
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Lesson Transcript
Instructor: Christine Serva

Christine has an M.A. in American Studies. She is an instructional designer, educator, and writer with a particular interest in the social sciences and American studies.

This lesson examines whether older adults spend money differently than their younger counterparts. We will also look at the expenditure patterns of older adults who are employed versus those who are retired.

Predicting Expenditure Patterns

This is Patrick. Each month he uses Social Security payments, as well as some of his savings, to pay for his expenses. At 85, he is no longer working but is in excellent health and lives a very active life.

This is Kara. At 68, she is still working, so mainly lives off of her earnings from employment. She has some chronic health issues and expects to retire soon. She is still putting money into retirement savings and anticipates needing a good deal for her long-term health care.

What expenditure patterns are older adults, like Patrick and Kara, likely to have? Are these different than their younger counterparts? This lesson examines this question and provides answers based on economic research into this topic.

Why Look at Expenditures?

The term expenditures refers to money spent on goods and services. Economists look at the expenditures of older adults by collecting data on how money is used and then categorizing it. They look at what patterns certain age groups share in common. Based on their interpretation of this data, researchers can help develop public policies, such as how the government should structure programs like Medicare and Social Security.

Economists know that the highest spending of our lives tends to take place during middle age, rather than the early or later years. This is sometimes described as a hump in spending in mid-life. Does this mean that as we age all types of expenses decrease?

Some economic theorists have found that not all expenses decrease. For instance, researchers Mark Aguiar and Erik Hurst have argued that the data shows three specific expenditures that decrease, while others, aside from health care, tend to remain the same.

Expenditures of Older Working Adults

Remember Kara, aged 68, who is working hard to put money away for her retirement and health care? Since she is still earning income at a job, she is likely to have three areas of expenditure that are higher than Patrick, who is not employed, according to Aguiar and Hurst.

Since Kara must get to and from work every day, she has transportation costs, such as gas or public transportation passes. She also may opt to eat out for convenience when she has less time and energy to cook at home. Periodically, she purchases new clothing to ensure she presents herself well at her job.

In addition to these three areas that are part of Kara's life that are no longer part of Patrick's, she also allocates funds to her retirement, saving money while she is still working. She is engaging in a good deal of precautionary saving, in anticipation of her upcoming retirement.

Precautionary saving refers to efforts made to save money by spending less now in preparation for uncertain times ahead. Especially due to her health problems, Kara anticipates needing more money down the road for health care, and since it's hard to judge exactly how much, she aims to save as much as possible at this point in her life.

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