{"id":222,"date":"2014-10-28T21:58:00","date_gmt":"2014-10-29T03:58:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2014\/10\/more-on-retirement-and-housing.html"},"modified":"2016-08-16T09:46:06","modified_gmt":"2016-08-16T15:46:06","slug":"more-on-retirement-and-housing","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/10\/more-on-retirement-and-housing.html","title":{"rendered":"More on retirement and housing"},"content":{"rendered":"\n<\/head>

New on the blogroll: \u00a0the Squared Away blog by the Center for Retirement Research at Boston College, where they posted\u00a0a pie chart <\/a>on retirement spending, with, as a surprising \u201cheadline\u201d item, the fact that retirees ages 75 \u2013 84 spend 42% of their income on housing \u2014 much more than you\u2019d initially expect when they should all have, in principle, paid off their mortgages.<\/p>\n

So I followed the link<\/a>. \u00a0And the numbers are interesting in a number of ways. <\/p>\n

These are actually surveys of household expenditures, based on surveys of households intended to reflect a wide cross-section of Americans, differentiated by the age of the oldest household member. \u00a0Unfortunately, the data doesn\u2019t differentiate between singles (widows\/widowers) and married couples, and it makes it difficult to assess the extent to which the changing patterns at older ages is due to, in fact, different consumption levels, vs. an increasing proportion of single-person households.<\/p>\n

The survey actually includes individuals as young as 50, and this youngest \u201cpre-retirement\/early retirement\u201d group, naturally, has the highest expenditures \u2014 and what\u2019s more, the survey indicates that they spend significantly less than they earn. \u00a0This is only shown as a graph, not with the data points, but, apparently, the mean household income for a 55 year old is about $95,000, and expenditures total about $50,000 \u2014 which would imply that near-retirees are saving pretty heavily. \u00a0In part, this is explicable by the fact that taxes \u00a0(at least, income taxes, anyway) aren\u2019t included as an \u201cexpenditure.\u201d \u00a0Perhaps this is also a quirky impact of using the mean rather than median. \u00a0It\u2019s odd in general that, except for the very oldest age in the survey, age 90, everyone<\/i> earns more than they spend, at the mean. \u00a0I suppose pensions and Social Security are counted as \u201cincome,\u201d as well as IRA distributions, but shouldn\u2019t, on average, retirees be spending down non-tax-deferred savings as well?<\/p>\n

Anyway, I can\u2019t account for that, so let\u2019s look at the basic data.<\/p>\n

Not surprisingly, expenditures decline with age. \u00a0(They also, in general, declined since 2003, especially for the youngest group, which dropped from 46K to 39K, ) \u00a0At median, expenditures decline from $38,642 for the 50 \u2013 64 year olds, to only $22,263 for the 85+ group. <\/p>\n

And the \u201chome\u201d category of expenditures is as high as 47% of expenditures for the younger group, dropping to 43\/42\/44% for the older categories, and, in absolute terms, dropping from $16,398 to a little more than half, at $8,791. \u00a0How bad is this? \u00a0The rule of thumb is always that housing is supposed to be 33% of income, right? \u00a0This figure is higher \u2014 but it also includes all sorts of \u201chome-related\u201d expenditures: \u00a0mortgages, property taxes, homeowner\u2019s or renter\u2019s insurance, rent, utilities, home repairs, home furnishings, housecleaning supplies, housekeeping and laundry services, gardening and yard supplies, gardening and yard supplies, and gardening and yard services.<\/p>\n

So it\u2019s actually pretty easy to see how people could be spending this much on \u201chome.\u201d \u00a0This includes furniture, for crying out loud! \u00a0And, for the older groups, even after the mortgage is paid off, a senior in their single-family home (and you know what a big fan I am<\/a> of seniors staying in their homes!) is going to be paying taxes and utilities, and have some new expenses: \u00a0a lawn service, snow removal service, and eventually a housekeeper.<\/p>\n

What\u2019s odd, though, is that, as high as housing is, as a percent of expenditures, food expenditures are surprisingly low. \u00a0Here\u2019s a table, converted into monthly expenditures:<\/p>\n

Age \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a050-64 \u00a0 \u00a065-74 \u00a0 75-84 \u00a0 85+
Household \u00a0 \u00a0$336 \u00a0 \u00a0 \u00a0$331 \u00a0 \u00a0 $269 \u00a0 \u00a0$179
Spending \u00a0 <\/p>\n

\u201cIndividual\u201d \u00a0 \u00a0$224 \u00a0 \u00a0 $221 \u00a0 \u00a0 \u00a0$179 \u00a0 \u00a0$120
Spending*<\/p>\n

* Assuming, as a wild guess, an average of 1.5 people in the household<\/p>\n

So what do you make of this?<\/p>\n

For comparison, the monthly maximum food stamp benefit, based on the USDA \u201cthrifty\u201d food plan, is $194 per month for a single-person household, and $146 for an \u201cadditional\u201d person. \u00a0Which means that the per-household expenditures for the oldest group is, at median, less than a single person\u2019s basic food needs, and for the second oldest group, assuming a certain number of two-person households, likely above this level as well.<\/p>\n

To be sure, \u201cfood\u201d counts only food purchased at home, not dining out, which is included in \u201centertainment\u201d \u2013 but I wouldn\u2019t want to try to guess how many meals dined-out the entertainment spending includes. <\/p>\n

You want another surprise? \u00a0Out-of-pocket medical costs. \u00a0If the youngest group includes a mix of still-employeds and early retirees, you\u2019d expect a significant number of them to be footing their own medical bills, and benefit substantially from Medicare kicking in at age 65. \u00a0But that\u2019s not actually the case. \u00a0Age 50 \u2013 64 spent, at median $2,338 in out-of-pocket healthcare spending, or, at mean, $4,176. \u00a0Age 65 \u2013 74? \u00a0It increased to $3,104\/$4,383. \u00a0 Yes, this is an aging issue, but I would have expected a decrease due to Medicare eligibility. \u00a0And other other odd thing is that, sure, the mean expenditure increases to $6,603 for the 85+s, but the median actually drops from $3,109 to $2,814. \u00a0Go figure.<\/p>\n

Of course, what I\u2019d really like to see is these values at various percentiles. \u00a0How much difference is there in the out-of-pocket healthcare spending, say, of a low-earner vs. a high earner?<\/p>\n

But that\u2019s as much as I can do with this study. \u00a0Your turn. \u00a0Thoughts?<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

New on the blogroll: \u00a0the Squared Away blog by the Center for Retirement Research at Boston College, where they posted\u00a0a pie chart on retirement spending, with, as a surprising \u201cheadline\u201d item, the fact that retirees ages 75 \u2013 84 spend 42% of their income on housing \u2014 much more than you\u2019d initially expect when they […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[450],"tags":[25],"class_list":["post-222","post","type-post","status-publish","format-standard","hentry","category-actuarial","tag-retirement"],"yoast_head":"\nMore on retirement and housing<\/title>\n<meta name=\"description\" content=\"New on the blogroll:  the Squared Away blog by the Center for Retirement Research at Boston College, where they posted a pie chart on retirement\" \/>\n<meta name=\"robots\" content=\"index, follow, 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