Housing biggest expense for 50-plus set
The majority of spending for Americans over 50 goes to mortgages, property taxes and other home-related expenses, according…
The majority of spending for Americans over 50 goes to mortgages, property taxes and other home-related expenses, according to data released last week by the Employee Benefit Research Institute.
In 2009, Americans 50 to 64 spent a median of $18,828, or 47% of their total expenses, on mortgages or rent, as well as insurance, property taxes and repairs, EBRI found. Meanwhile, those over 85 spent a median of $9,533, which accounted for 43% of their total spending.
The research group, which analyzed data from 5,000 U.S. households between 2000 and 2009, found that Americans progressively spend less money as they age. Although expenses generally dropped off as the respondents in the survey aged, health care seemed to be the one area where people paid more as they aged.
For instance, in 2009, people 50 to 64 spent a median of $2,844, or 9% of total expenses, on their health. That number went as high as $3,692 for people 75 to 84, accounting for 15% of their expenditures, and then dropped slightly to $3,000 for the 85-and-over crowd, making up 18% of their total costs.
Author Sudipto Banerjee, a research associate with EBRI, surmised that even as older people eventually pay off their mortgages, they still pay a good deal of cash on maintenance costs, utilities and property taxes, which never seem to go away.
“The dollar amount spent on homes goes down pretty fast, but in percentage terms, the amounts are still large,” he said. “Property taxes are almost a constant factor.”
Mr. Banerjee also concluded that expenditures for a retired household are about 80% of what they are for a working household.
Meanwhile, a retired household’s income is equal to 57% of that of a working household.
Although the disparity in expenditures and income may be large, Mr. Banerjee said that workers still spend a lot of their money on FICA taxes and retirement plan contributions at the workplace.
At retirement, these expenditures change or are eliminated.
Thus, provided that retirees have saved enough by the time they stop working, they can still live on a lower percentage of pre-retirement income, Mr. Banerjee said.
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