EBRI Issue Brief

Older Americans' Spending Profiles: One Size Does Not Fit All

Dec 10, 2020 25  pages


Understanding the spending patterns of the elderly and forming an educated estimate of households’ budgets throughout households’ old age is a key element of retirement planning. In this Issue Brief, the Employee Benefit Research Institute (EBRI) explores variations in spending of older households using the Health and Retirement Study (HRS) and the Consumption and Activities Mail Survey (CAMS). The analysis also seeks to identify the factors that are correlated with spending patterns in order to provide additional insight for approaches to saving and investment for retirement. Such analysis can also help in the development of more effective withdrawal strategies during retirement.

Assessing the HRS CAMS data, we find there are four spending profiles: Typical, Home, Health, and Discretionary.

  • Typical Spender: Typical Spenders had no large variation in spending relative to the overall sample average. Typical Spenders within the 55–64 age group were characterized as slightly more likely than not to be part of a couple. Just under a quarter had a college degree. Nearly half (48 percent) were either retired or partially retired. Just under a third (29 percent) received pension or annuity income, and the median age of those claiming Social Security was 61.5 years old. Slightly more (54 percent) Typical Spenders ages 65–74 were single vs. their younger counterparts, and 62 percent of Typical Spenders ages 75–85 were single. Both older Typical Spender age groups were more likely than the younger Typical Spenders to have pension or annuity income: 57 and 61 percent, respectively. 
  • Home Spenders: Home Spenders are households allocating 60 percent or more of their total spending to housing expenses. They were far more likely to be single, had low levels of income and wealth, and were the least likely to hold a college degree. They were also more likely to report their labor market status as disabled, unemployed, or out of the labor force. Those falling into this category were least likely to have pension or annuity income across all age cohorts, and those ages 55–64 were the most likely to claim their Social Security benefits early.
  • Health Spenders: Health Spenders are households allocating 20 percent or more of their total spending to out-of-pocket health expenses. Those in the 65–74 and 75–85 age cohorts had the highest likelihood of reporting poor health status (26 and 30 percent, respectively) and the highest levels of utilizing medical care. Health Spenders that are 55–64 years old were the most likely to be retired or partially retired (58 percent) and were the second most likely to claim Social Security benefits early, after Home Spenders.
  • Discretionary Spenders: Discretionary Spenders are households allocating 25 percent or more of their total spending on the entertainment, gifts, and contributions categories. Discretionary Spenders were more likely to be part of a couple and had the highest likelihood of holding a college degree compared with other spenders. They also had higher levels of income and wealth across all age cohorts and were the least likely to report poor health status. Many of these spenders said they were partly retired — more than any other spenders in the 55–64 and 65–74 age cohorts. This suggests that they are taking a gradual transition path to retirement. They also had the highest likelihood of receiving pension or annuity income, and those 55–64 years old were more likely to claim their Social Security benefits at older ages.

The research also examined how spenders transition over time. The spending type that was most likely to remain consistent from ages 55–64 and 65–74 was the Typical Spender. After Typical Spenders, Discretionary Spenders remained the most likely to remain in their same spending category over time. Home Spenders in the 55–64 age group had the highest probability of switching to a Typical Spender (48 percent) when they were ages 65–74. Health Spenders showed the most movement, with only 28 percent remaining in this spending category from ages 55–64 to 65–74.


EBRI was able to fund the development of this research thanks to a generous grant from the RRF Foundation for Aging.


Health and Retirement Study (HRS), public use dataset. Produced and distributed by the University of Michigan with funding from the National Institute on Aging (grant number NIA U01AG009740). Ann Arbor, MI (1992–2016).