Expenditures of the aged.

Summary and Overview Policymakers and researchers are concerned about the adequacy of economic resources of the aged. Income tells part of the story with regard to adequacy, but it is also useful to seek out other measures of standards of living, such as expenditures. To improve the availability of statistics on expenditures of the aged, the Social Security Administration produced the Expenditures of the Aged Chartbook. The chartbook is based on data from the 2002 Consumer Expenditure Survey Public-Use File, sponsored by the Bureau of Labor Statistics. Both total expenditures and components of expenditures are examined to give policymakers and researchers a more comprehensive understanding of the expenditures of the aged. This article includes a short overview of existing research on the expenditures of the aged and examples of charts from the chartbook. The contents of the chartbook are displayed in Box 1. The chartbook is available on the Office of Policy Web site at http://www.socialsecurity.gov/policy. Research on Expenditures of the Aged The drop in expenditures after retirement is well documented. Hamermesh (1984) finds that preretirement expenditures are larger than expected income in retirement. Bernheim, Skinner, and Weinberg (1997) show that when workers retire, expenditures fall by 12 percent. Ameriks, Caplin, and Leahy (2002) and Hurd and Rohwedder (2003) find that retired households spend about 20 percent less than households in the years shortly before retirement. Although expenditures are lower in retirement, it does not necessarily follow that standards of living and well-being are lower as well. It is possible that retirees expect to spend less and that well-being is maintained because they have more time to produce goods at home. Retirees may substitute housework, shopping, cooking, and home improvements for goods they would otherwise purchase at the store. In addition, retirees do not experience costs associated with working such as commuting. Researchers have found evidence to support the theory that well-being for individuals in retirement is maintained at a lower expenditure level than it is for those active in the labor force. Ameriks, Caplin, and Leahy (2002) find that people expect expenditures in retirement to be lower by the same 10 percent to 20 percent difference that actual retirees experience. Hurd and Rohwedder (2003) show that retired men spend about 9 more hours a week on home production than they did while working. In addition, they find that workers expect retirement expenditures to be 20 percent lower, while retirees say their expenditures are from 12 percent to 17 percent lower than when they were working. Data on Expenditures of the Aged The chartbook is based on data from the 2002 Consumer Expenditure Survey Public-Use File. With records on 600 types of expenditures, the survey provides comprehensive data on the buying habits of consumers in the United States. The sample is representative of the total noninstitutionalized population in the United States. The Consumer Expenditure Survey program consists of two separate survey components, each with its own questionnaire and independent sample. The interview survey collects data on monthly expenditures; the diary survey collects weekly expenditures of frequently purchased items. Expenditures in the survey are measured for the consumer unit (CU). The interview survey has an unweighted sample of 2,698 consumer units aged 55 or older, which are weighted to represent 37.7 million. A consumer unit can be members of a household who are legally related, a single person, or two or more people living together and sharing expenses. A CU's reference person is the CU member who primarily owns or rents the home. The characteristics of a CU, such as age, refer to those of the reference person. The average size of CUs, by age of the reference person, was 2.2 for CUs aged 55-64, 1.9 for those aged 65-74, and 1. …