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April 1994, Vol. 117, No. 4
Rose M. Rubin and Michael Nieswiadomy
A djustment to retirement and the consequent economic changes make "the golden years" one of the more difficult, yet interesting phases of the entire life cycle. Increasing numbers of people are retiring earlier in life and, at the same time, many are living longer. These events, coupled with the demographic changes in the elderly population, make the consumption and savings behavior of the retired increasingly noteworthy.
This article compares the expenditure functions of retired and nonretired persons aged 50 and older, using the Bureau of Labor Statistics Consumer Expenditure Survey. It explicitly acknowledges the heterogeneity of older Americans by analyzing the effect of age, education, family status, race, income, and assets on 27 standard Consumer Expenditure categories.1
Although the elderly are commonly referred to as if they were one group, they are as diverse as the general population. The elderly population can be viewed as several distinct market groups2: the young-old (65-74 years) who are generally active and still married; the old (75-84 years) who are slowing down and often widowed; and the very old (age 85 and older) who often need help in daily activities. The income and expenditures of the young-old and the older age group are quite different. For example, the young-old benefit from higher Social Security (as a result of their higher earnings levels) and have better pensions and asset income.3 Another reason for looking at different age groups is to determine the trend toward early retirement. Because Social Security income can start at age 62, today's average age at retirement has declined, as shown by the change in the age distribution of men receiving Social Security benefits. In 1967, 35 percent of retired male Social Security beneficiaries were in the 62-64 age group, but by 1987, the figure had risen to 67.1 percent.
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1 It is now recognized that the elderly are not a homogeneous group. See Mark D. Hayward and William R. Grady, "Work and Retirement Among a Cohort of Older Men in the United States, 1996-1983," Demography, August 1990, pp. 337-56.
2 A.E. Fareed and G.D. Riggs, "Old-Young Differences in Consumer Expenditures Patterns," The Journal of Consumer Affairs, Summer 1982, pp. 152-60. Beth Harrison, "Spending patterns of older persons revealed in expenditure survey," Monthly Labor Review, October 1986, pp. 15-18. Retia S. Walker and Frankie N. Schwenk, "Income and Expenditure Patterns of Consumer Units with Reference Person age 70 to 79 and 80 or Older," Family Economics Review, vol. 4, no. 1, 1991, pp. 8-13. Pamela B. Hitschler, "Spending by older consumers: 1980 and 1990 compared, " Monthly Labor Review, may 1993, pp.3-13. Pamela Hitschler did not differentiate the elderly according to retired or working status. Thus, no direct comparison can be made with our study.
3 However, older women, minorities and the oldest old experience relative economic disadvantages. See Marilyn Moon, "Consumer Issues and the Elderly," The Journal of Consumer Affairs, Winter 1991, pp. 235-44. Frankie N. Schwenk, "Changes in the Economic Status of America's Elderly During the Last 50 Years," Family Economics Review, Winter 1993, pp. 18-27.
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