What Difference Does Location Make in Retirement Spending?

By Nevin Adams • February 24, 2017 • 0 Comments
When it comes to spending in retirement, a lot could come down to where you live.

That’s the conclusion of new research by the nonpartisan Employee Benefit Research Institute (EBRI), which finds large variations in spending by older households across the country.

According to “Geographic Variation in Spending Among Older American Households,” while there are significant differences in spending levels across different large U.S. Census regions (such as the Northeast vs. the South), the study found there are much larger differences among the smaller Census divisions (such as parts of a region, such as the New England vs. South Atlantic).

Specifically, looking at variation by total household spending:

  • Among 65-to-74-year-olds living in different census regions, Northeastern households had the highest median (mid-point) annual spending ($41,860). The lowest was found among Southern households ($32,836).

  • Among the different census divisions, New England households (CT, RI, MA, VT, NH and ME) between ages 65 to 74 spent the most (median annual spending of $46,019), while households in that age group in the West South Central division (TX, OK, AR and LA) spent the least ($28,540).

Where’ Withal

The report notes that since housing and housing-related expenses form a large part of total household expenses, geographic differences in housing and housing-related expenses are consistent with those total spending differences. For example, New England households between ages 50 to 64 spent almost 2.5 times more (annual median of $30,240) on housing and housing-related expenses than those in the southern states of TX, OK, AR and LA (annual median of $11,948).

However, when it comes to health care spending, the analysis notes that geographic differences do not follow the pattern of total spending or housing-related spending. For example, Midwestern states have much higher health care expenses than other regions for those ages 75 and above and non-institutionalized. Among those 85 and above, the median annual spending among Midwesterners was $3,480, which was 41.5% higher than the median ($2,460) in the next-highest spending region (the West).

Nationally, average household spending declined with age. In 2015, average total annual spending for households between ages 50 and 64 was $53,087, which declined to $34,982 for those ages 85 and above. Median spending levels for the same age groups were $42,235 and $26,497, respectively.

Housing and housing-related expenses remained the largest spending category for all age groups above 50, varying between 44% and 48% of total household spending for different age groups.