How are seniors spending their money?

Saving money for retirement is a common necessity, but how are senior citizens spending their money? It is a misconception that after retirement, a person’s spending decreases. In fact, 33% of all households containing retirees increase their spending habits about six years after retiring.¹ However, 44% of workers who are 50 years old and over believe their expenses will stay the same, 34% expect expenses to decrease, while just 22% expect them to increase.²

There is mandatory spending like healthcare and basic living needs such as housing and food, and there is elective spending like travel and shopping. With the need to save but the desire to spend, seniors need to understand their finances and how to budget appropriately to live securely on their savings.

At 62, seniors get to obtain their social security benefits. Social security is a program by the U.S. government that allows employees to submit a percentage of their income to the government through taxes and then when they are eligible through retirement or disability, they receive social security payments.

President Biden submitted a plan for bolstering Social Security payments in recognition of America’s aging population. Individuals collecting benefits for 20 or more years would receive an increased monthly stipend to supplement long-term retirement reserves. Additionally, benefits for those who have worked for 30-plus years would be paid at 125% or more of the federal poverty level. Lastly, widows and widowers would receive higher spousal benefits than the current plan allows.³

Healthcare is very important to seniors, and the cost of future healthcare is unpredictable.

When someone turns 65, they become eligible for Medicare, a federal health insurance program. Seniors will need to budget to pay their monthly premium for Medicare as well as any prescription drugs they might need in their plan.

The Biden administration proposed lowering the age of Medicare eligibility to 60. The president has also petitioned Congress to allow patients to purchase prescription drugs from overseas suppliers and to permit Medicare to use its immense buying power to negotiate prescription drug prices, lowering the cost of medication for millions of seniors. Older Americans face challenges when seeking employment and securing adequate healthcare benefits, so this proposal will help them secure the benefits they need for a healthy and fulfilling life on a fixed income. Lowering the age to 60 would bring down Medicare’s per capita costs and lower premiums for people 65 and older.

For seniors who value their independence and desire to remain in their own homes versus long-term care facilities, Biden has proposed both a $5,000 tax credit to support family caregivers, as well as a $450 billion plan (rolled out over 10 years) to provide immediate access to in-home care.

While healthcare costs are unpredictable in a senior’s future, housing expenses are generally the most consistent item to budget.¹ Expenses associated with housing like mortgage or rent payments, utilities, maintenance and furnishings are easy to compute and may have remained steady throughout the years. It was found that senior citizens spend about 35% of their funds on housing. ⁵

Although, to mitigate these expenses, seniors seek travel discounts and are able to take advantage of cheaper trips because they have the freedom to travel during non-peak times when those who are working are unavailable.

When traveling alone or to unfamiliar parts of the country, seniors can be confident in their health and security with Alert1’s on-the-go medical alert system. Alert1 uses GPS and fall detection technology to locate anyone with a device if a fall is detected or a button is pushed. The on-the-go medical alert systems with fall detection ensure that help will be received whenever and wherever it is needed.

With rising healthcare costs, cost of living increases, and housing costs, seniors entering their golden years can be overwhelmed by living without a regular paycheck. However, there are budgeting tips that seniors can follow to stretch their budgets and pad their savings account while living on a fixed income.

Seniors should start with creating a new, retirement budget. Money may be being wasted if a financial situation has changed and nothing has been done to adjust for that change. If it has been six months since you or your loved one has reviewed your household budget, then take time to sit down and look at those finances. There may be revisions that have to be made for new or changed monthly bills, income gaps, or you or your loved one may be able to cut expenses by creating a better grocery list instead of eating out often. Any revision to save money will help in the long run.

At the beginning of each month, commit to tracking how and where money is spent each day. This means keeping a detailed report so by the end of the month it is easy to compare what was spent versus the budget at the beginning of the month. Spending can then be adjusted accordingly.

The golden years of most people’s lives means more time for the activities that work overshadowed. However, if entertainment expenses take a considerable chunk of you or your loved one’s income, there is no shame in borrowing fun instead of purchasing everything. Getting a library card and borrowing books or movies is a great way to start. Or, you or your loved one can join a senior center where there are activities for seniors. Another way seniors can save money on entertainment is to invest in streaming tv and movies. Taking the time to compare streaming services to see what you or your loved one wants and what fits into the budget can save money while enabling budget-friendly entertainment.

One benefit of growing older is that seniors can always take advantage of senior discounts. Even utilities companies sometimes offer lower rates for seniors and phone companies have plans that reduce seniors’ monthly bills or even supply free or discounted rates on cell phones. If you or your loved one still drives, it would be a great idea to contact the insurance agent to ask about senior driver discounts. Senior discounts can stretch your budget month to month.

If it is possible to figure out spending ahead of time, preemptive budgeting is the best way to start. Alert1 offers complimentary consultations to help members select affordable medical alert systems. The medical alert systems allow you or your loved one to live independently, but never alone—an invaluable part of any senior budget!

¹ Magna Life Settlements Staff. (2021, Jan. 3). Where Seniors Spend Money (Senior Retirement Expense Guide). Magnalifesettlements.com. Where Seniors Spend Money [Retirement Expense Guide] - Magna Life

² Backman, Maurie. (2018, Nov. 30). Will your expenses stay the same in retirement? cnn.com. Will your expenses stay the same in retirement?

³ Elder Law. (2021, March 13). Biden plan would increase Social Security benefits. schomerlawgroup.com. Biden Plan Would Increase Social Security Benefits | Los Angeles Estate Planning Attorneys

⁴ Caporal, Jack. (2021, May 26). Average Retirement Savings in the U.S.: $65,000. fool.com. Average Retirement Savings in the U.S.: $65,000

⁵ Powell, Robert. (2018, March 7). Worry More About Rising Housing Costs in Retirement Than Healthcare Costs. thestreet.com. Worry More About Rising Housing Costs in Retirement Than Healthcare Costs

Saving money for retirement is a common necessity, but how are senior citizens spending their money? It is a misconception that after retirement, a person’s spending decreases. In fact, 33% of all households containing retirees increase their spending habits about six years after retiring.¹ However, 44% of workers who are 50 years old and over believe their expenses will stay the same, 34% expect expenses to decrease, while just 22% expect them to increase.²

There is mandatory spending like healthcare and basic living needs such as housing and food, and there is elective spending like travel and shopping. With the need to save but the desire to spend, seniors need to understand their finances and how to budget appropriately to live securely on their savings.