Home-Related Costs Number One Expenditure in Retirement

February 14, 2012 (PLANSPONSOR.com) – According to a report by the Employee Benefit Research Institute (EBRI), older Americans (50 and older) spend less in retirement, and home-related expenses remain their top spending category. 

The report shows that health costs are the second-biggest expense for older Americans, and data shows that demographic sub-groups such as singles, blacks, and high school dropouts are outspending their resources in retirement.

The EBRI report notes that before retirement, people pay FICA (Social Security) taxes, incur work-related expenses, and set aside money for retirement. But after retirement, most people have different financial obligations, and, as a result, retirees may be able to maintain their level of preretirement wellbeing with very different income levels.

The full article, “Expenditure Patterns of Older Americans, 2001‒2009,” documents the income and expenditure patterns of Americans who are retired or close to retirement, using data from the Health and Retirement Study (HRS) and its supplement Consumption and Activities Mail Survey (CAMS). Both surveys were conducted by the Institute for Social Research at the University of Michigan.

The EBRI analysis examines income, expenditures, and wealth-holding patterns to provide a more complete idea of how people are doing in terms of being able to afford retirement, compared with arbitrary estimates such as income replacement ratios.