Understanding Expenditure Patterns in Retirement

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Understanding the consumption needs of retirees is critical to assessing the adequacy of retirement income and the possible impact of Social Security reform on the well-being of older Americans. This study uses data from the Health and Retirement Study and a recently-released supplemental expenditure survey to analyze expenditures patterns and consumption needs for adults ages 65 and older. Results suggest that married adults consume between 59 and 84 percent of their household income, depending on how income is measured. Even at older ages individuals devote a larger share of their expenditures and income to housing than any other category of goods and services, including health care. Fully 8 percent of married adults report before-tax incomes that fall short of our estimated basic-needs threshold, consisting of housing, health care, food, and clothing. By comparison, only 3 percent of married adults have incomes below the official poverty level.