A majority of older American households spend less than they make, but in 2009, more than 14 percent of older households spent well beyond their means.
A new report by the Employee Benefit Research Institute found that single people, households without pensions, African-Americans and Hispanics are more likely to spend more than they earn. Health care and home-related expenses are the biggest drivers of income deficit.
Deficit spending is especially bad for the elderly, said Sudipto Banerjee, EBRI research associate.
“Those with an income shortfall are far more likely to be low-income, low-asset households, and they spend down their liquid assets at a faster rate than households that do not have an income shortfall,” Banerjee said.
The report found that 14.3 percent of households with members age 65 and above had spending that exceeded 175 percent of their household income. One in five households, or 19.2 percent, age 65 or older outspent their income by 50 percent or more.
Social Security remains the primary source of income for those above age 65. In 2009, households ages 65 to 74 and households with members age 85 or above received 54 percent and 66 percent of their total household incomes, respectively, from Social Security benefits. Income from pensions and annuities is the second-largest source of income for older households.
The importance of Social Security income increases with age. For households that had members between the ages of 65 and 69 in 2001, the share of household income derived from Social Security rose from 47 percent in 2001 to almost 60 percent in 2009.
The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute based in Washington, D.C., that focuses on health, savings, retirement, and economic security issues.