How veterans’ benefits relate to their spending in the Consumer Expenditure Surveys

Veterans have made invaluable contributions to the nation’s security and safety through their military service. Thus, there are many benefits offered to veterans once they have returned to their civilian lives. One way to gain insight into how these benefits relate to the spending of veterans is by comparing expenditure patterns between veterans and nonveterans. Differences in demographic patterns between veterans and nonveterans are also important to study because these differences might explain differences in spending. For example, rates of homeownership increase with age.¹ So, are higher rates of homeownership among veterans tied to their benefits, or to veterans being a higher average age than nonveterans? Similarly, do differences in healthcare expenditures result from benefits or differences in age? To answer these questions, this article will analyze the effects of veteran benefits on housing and healthcare expenditures.

The U.S. Bureau of Labor Statistics (BLS) started collecting data on veteran status in the Consumer Expenditure Surveys (CE) in 2019. The CE defines a veteran as someone who served on active duty in the U.S. Armed Forces but is not currently serving in the Armed Forces. As a research product, the CE includes 2022 expenditure data by military and nonmilitary families, including those with veterans.²

Data description

The analysis in this article uses CE data for expenditures made in 2022. CE data are collected by the U.S. Census Bureau for BLS in two surveys. The Interview Survey records major and/or recurring expenditures, such as vehicles and insurance; and the Diary Survey records more minor expenditures, particularly those for frequently purchased items, such as specific groceries (e.g., lettuce, bananas, rice, etc.).³ The results in this article are based on tabular data, which contain results integrated from both surveys.⁴ These results are not tested for statistical significance, which requires the use of CE Public Use Microdata.⁵ Therefore, differences described by veteran status should be interpreted accordingly.

As of 2022, the United States was still experiencing effects of the COVID-19 pandemic.⁶ Thereby, veterans and nonveterans may have changed their expenditure patterns in different ways in reaction to the COVID-19 pandemic. Unfortunately, because 2022 is the first year for which tabular CE data are available on veteran status, it is impossible to determine whether the COVID-19 pandemic affected the two groups differently.

Finally, this article also includes information from the U.S. Department of Veteran Affairs (VA). The VA provides many benefits through the Veteran Benefits Administration, which is one of three administrations composing the VA.⁷ The Veteran Benefits Administration delivers and administers many benefits to support veterans and their dependents and survivors.⁸ These benefits fall under seven major program areas: compensation; pension and fiduciary; education; insurance; home loan guaranty; veteran readiness and employment; and outreach, transition and economic development.⁹ In fiscal year 2022 (i.e., October 1, 2021, through September 30, 2022), the Veteran Benefits Administration spent approximately $3 billion to administer these programs.¹⁰

Demographics and sample selection

In 2022, the U.S. population included approximately 134.1 million consumer units (CUs).¹¹ CUs are a BLS term similar to households.¹² Of these CUs, 15.2 million (11 percent) included at least one veteran.¹³ However, CUs usually include more than one member (e.g., married couples with or without children, single parents with at least one child, adults providing elderly care for at least one of their parents with whom they reside, etc.). Nevertheless, in 2022, single-member CUs accounted for 31.0 percent of all CUs.¹⁴ Because CE collects expenditures for the CU as a whole, rather than for individual members of the CU, it is necessary to look at single-member CUs to be able to directly compare veteran to nonveteran spending. For this reason, in the remainder of this article, “CUs” denote single-member CUs only, and the terms “veteran” and “nonveteran” denote the status of the individual composing the CU. For convenience, “veteran” and “nonveteran” should be interpreted to describe these single-member CUs, unless explicitly stated otherwise.

This article examines three age groups: people under 45 years of age, people 45 to 64 years of age, and people 65 years of age and older. These age ranges were selected for the following reasons: data collected about the 65-and-older age group shows the effects of Medicare and Social Security benefits on spending; age 66 or 67, depending on birth year, is the standard age of eligibility for Social Security benefits, and age 65 is the standard age of eligibility for Medicare benefits.¹⁵ Considering age groups under age 65 was intended to evaluate outcomes at different career stages. That is, under age 35 would be defined as “early career,” age 35 to 64 would be “midcareer,” and age 65 and older would be “post career,” i.e., retirement. However, the sample size for veterans under age 35 was too small to be statistically reliable.¹⁶ Because standard CE tables show that income peaks at the 45- to 54-year-old range, the 45- to 64-year-old range was tested, and the sample sizes for both under age 45 and age 45 to 64 were viable.

Finally, owned-dwelling expenditures include mortgage interest and similar charges (i.e., interest on home equity loans and lines of credit) along with property taxes, maintenance, repairs, insurance, and other expenses. But owned-dwelling expenditures do not include mortgage principal payments, which BLS collects as a reduction of mortgage principal. Therefore, mortgage principal payments are reported as negative values in the liabilities section of published tables. In this article, the absolute value of the reduction in mortgage principal was added to the total owned-dwelling expenditure to obtain the full outlay for housing that the average homeowner experiences.¹⁷

Descriptive results

Table 1 shows selected demographics for veterans and nonveterans, such as income, age, race, and educational attainment. In 2022, the U.S. population included 3.9 million single-member veteran CUs (henceforth, “veterans”) and 37.7 million single-member nonveteran CUs (henceforth, “nonveterans”). On average, veterans were older (age 68.4) than nonveterans (age 55.2) and more likely to be male (89.4 percent compared with 43.0 percent for nonveterans). Both veterans and nonveterans were most likely to be White (82.3 percent for veterans and 78.6 percent for nonveterans). Both were similarly likely to be college educated; 69.5 percent of veterans attended college compared with 68.8 percent for nonveterans. However, veterans had a lower average income before taxes ($40,065 compared with $47,735 for nonveterans). Consistent with lower income, on average, veterans spent less overall ($39,578) than nonveterans ($44,804). But veterans were much closer to spending the total sum of their pretax income than were nonveterans (98.8 percent compared with 93.9 percent).

Spending on selected expenditures by veteran status

VA benefits may directly affect spending patterns in selected categories. Nevertheless, VA benefits do not have a major effect on the distribution of all expenditure categories or a given category’s share of total expenditures. For example, chart 1 shows that veterans and nonveterans had the same top five major expenditure categories: housing, transportation, food, healthcare, and personal insurance and pensions. These categories, in general, are the top five spending categories in descending order for all CUs based on CE data. Housing was the largest expenditure share for either group (39.1 percent for veterans and 39.5 percent for nonveterans).

Both groups allocated the second largest share of total expenditures to transportation spending (18.1 percent for veterans and 14.3 percent for nonveterans). This difference in transportation expenditures was driven by veterans spending about $900 more on vehicle purchases than nonveterans. Veterans spent $2,935 on vehicle purchases, while nonveterans spent $2,018.

Both groups allocated similar shares for food: 11.5 percent for veterans and 11.8 percent for nonveterans. However, veterans allocated a larger share to healthcare (10.1 percent) than personal insurance and pensions (5.7 percent), while nonveterans allocated a larger share on personal insurance and pensions (9.2 percent) than healthcare (8.4 percent). This is an interesting finding because veterans have an extensive list of healthcare costs that are waived under VA care; for example, there are no enrollment fees, monthly premiums, or deductibles.¹⁸

One of the variables that has the clearest relationship to healthcare spending is age. Because the average age for veterans is 13 years older than nonveterans, it is apparent why veterans spend a greater share of total expenditures on healthcare. Analysis of healthcare expenditure levels, including the role of age, appears later in this article.

The VA also offers benefits for eligible veterans for housing, education, and healthcare expenditures. Although education is a core VA benefit, this article will not investigate education expenditures. Veterans and nonveterans had low response rates to questions about education expenditures, which led to high relative standard errors for education expenditures.¹⁹ Accordingly, the rest of this article will focus on analyzing housing and healthcare expenditures.

VA housing benefits

The VA offers home loans to eligible veterans that may be used to “purchase a home, purchase a residential unit in certain condominium projects, build a home, refinance an existing home loan, and/or improve a home by installing solar heating or other energy conservation equipment.”²⁰ VA home loan eligibility is contingent on the period of active duty for a veteran.²¹

The VA offers four loan types: one VA direct loan and three VA-backed loans.²² The VA acts as the mortgage lender for a VA direct loan, and veterans work directly with the VA to “apply for and manage the loan.” With a VA-backed loan, the VA guarantees a partial amount of the loan a veteran obtains from a private lender. This guaranty enables the lender to recover some or all of their losses if the loan goes into foreclosure. These VA loan guarantees allow veterans to get loans at lower rates than nonveterans because the lender assumes less risk. In fact, nearly 90 percent of all VA-backed loans are made without a down payment.²³ In addition, VA-backed loans provide the additional benefits to qualifying veterans: better loan terms, borrowing limits up to the Fannie Mae and Freddie Mac conforming loan limit, no requirement to secure private mortgage insurance or pay mortgage insurance premiums, reduced closing costs, and no penalty fee if the home loan is paid off early.²⁴

In fiscal year 2022, the VA spent $256.6 billion on home loans. In that same period, the VA guaranteed 746,091 home loans, with an average loan amount of $343,895.²⁵ The Office of Public and Intergovernmental Affairs notes that the VA has guaranteed more than 25 million home loans since 1944.²⁶

Housing tenure by veteran status

CE data show the relationship of VA benefits to housing expenditures. For example, table 1 shows that veterans were more likely to be homeowners (64.2 percent) compared with nonveterans (49.6 percent). Among homeowners, veterans were more likely to not have a mortgage at all than nonveterans (39.7 percent and 28.5 percent, respectively). However, in 2022, veterans were, on average, 13 years older than nonveterans; and, in general, older consumers are more likely to own their homes (with or without mortgages) than younger consumers.²⁷ To properly analyze the effects of VA benefits, this article looks at housing tenure and expenditures by age ranges.

Veterans are more likely to own their homes compared with nonveterans. At the same time, veterans also purchase their home at a younger age. (See table 2.) For those under age 45, veterans were twice as likely in 2022 to own their homes with a mortgage than nonveterans (35.6 percent and 17.1 percent, respectively). In this age group, 10.7 percent of veterans own their home without a mortgage, compared with only 6.1 percent of nonveterans. In the middle age group, housing tenure evens out between veterans and nonveterans; nonveterans are slightly more likely to be homeowners than veterans for homeowners with a mortgage and homeowners without a mortgage (56.3 percent for veterans and 58.0 for nonveterans). However, in the oldest age group, veterans were once again more likely to own their homes than nonveterans for homeowners with a mortgage and homeowners without a mortgage (69.9 percent and 65.5 percent, respectively). But veterans are more likely to own outright (not have a mortgage) than nonveterans (51.3 percent and 47.5 percent, respectively).

Housing spending by veteran status

In 2022, veterans spent $15,493 on total housing, while nonveterans spent $17,680.²⁸ One explanation for this difference could be that veterans, compared with nonveterans (as shown in table 1), are more likely to live in rural areas, where housing is less expensive on average than urban areas.²⁹ However, spending for total housing should be interpreted carefully. Not only does spending for total housing include mortgage interest and rent; it also includes goods (e.g., furniture) and services (e.g., utilities and gardening) not directly related to the cost of the dwelling. Although most consumers either own or rent, they usually do not do both at the same time.³⁰ Expenditures for total housing are averages of all consumers, some of whom own and some of whom rent. Therefore, examining dwelling expenditures separately for homeowners and renters provides a clearer picture of housing expenditure by veteran status.

Table 3 shows that in 2022, nonveterans spent about $2,000 more on owned dwellings than veterans ($11,927 compared with $9,513, respectively). Veterans spent about $1,000 less on mortgage payments than nonveterans ($4,049 compared with $5,032, respectively). To maintain a sufficient sample size, this article combines the lower two age ranges to compare housing expenditures. Table 3 shows that veterans under age 65 spent less than nonveterans on total owned dwellings ($12,335 compared with $13,550), but both groups spent a similar amount on mortgage payments ($6,896 for veterans and $7,022 for nonveterans). Veterans age 65 and older spent about $2,000 less than nonveterans on total owned dwellings and about $400 less on mortgage payments.

However, as mentioned previously, veterans are more likely to own their homes outright (not have a mortgage). Examining only homeowners with a mortgage shows the effects of VA housing benefits. In all age groups, veterans with a mortgage spent $2,370 less than nonveterans with a mortgage on total owned dwellings and $1,381 less on mortgage payments. (See table 4.) This remains true between the two age groups. Veterans under age 65 spent $2,794 less than nonveterans on total owned dwellings. Veterans age 65 and older spent $2,206 less than nonveterans age 65 and older on total owned dwellings and $1,444 less on mortgage payments.

VA healthcare benefits

As with housing benefits, the VA offers healthcare benefits to eligible veterans. As of September 2023, there were 9.1 million eligible veterans enrolled in the VA health system.³¹ The healthcare benefits veterans receive include no enrollment fee, monthly premiums, or deductibles. In fact, most veterans have no out-of-pocket healthcare costs, although some veterans may have to pay small copayments for healthcare or prescription drugs.³² In addition, veterans do not pay for the treatment of any illness or injury that the VA determines is related to their military service. The VA also provides free mental health services to all veterans.³³ However, even with these benefits, in 2022, veterans spent more ($3,982) than nonveterans ($3,748) on healthcare (i.e., health insurance, medical services, drugs, and medical supplies). Possible explanations, such as difference in average age, are considered in the subsequent section.

Healthcare spending by veteran status

Veterans and nonveterans differed little in their allocation of healthcare spending. (See chart 2.) Health insurance was the largest share of healthcare expenditures for both groups (65.5 percent for veterans and 64.5 percent for nonveterans). Also, both groups allocated similar shares to medical supplies (3.8 percent for veterans and 3.7 percent for nonveterans). However, veterans allocated nearly double the percentage share of their healthcare spending to drugs (17.9 percent for veterans and 9.8 percent for nonveterans). In contrast, nonveterans allocated a higher percentage of their healthcare spending to medical services (12.7 percent for veterans and 22.0 percent for nonveterans).

Overall, veterans spent more than nonveterans on total healthcare ($3,990 and $3,753, respectively). However, given the relationship of health status to age, it is important to break down these expenditures by age group. Intriguingly, despite that all veterans spent more on healthcare than all nonveterans, veterans in each age group spent less than nonveterans in their same age group. (See table 5.) This paradox can be resolved by considering the difference in age distribution for these groups. On average, single veterans are about one-half a generation (13 years) older than single nonveterans. Furthermore, 63.7 percent of veterans are 65 years or older, while only 39.1 percent of nonveterans are in that same age group. Regardless of veteran status, consumers age 65 and older spend more on healthcare than those below the age of 65. Therefore, even if veterans age 65 and older spent less than nonveterans in that age group, the fact that, proportionately, far more veterans were age 65 and older than were nonveterans pushes the weighted average of healthcare expenditures for veterans higher. The larger percentage of nonveterans who are under age 65 tips the weighted average of healthcare expenditures for nonveterans lower.

Taking a closer look by age group, veterans under the age of 65 spent less than nonveterans of the same age range on total healthcare and all its major components (health insurance, medical services, prescription drugs, and medical supplies). (See table 5.) In fact, with the exception of medical supplies and prescription drugs for veterans age 65 and older, veterans spent less on every major component of healthcare, regardless of their age. This is consistent with VA research. VA patients are older than other veterans, with 77.6 percent being age 45 and older.³⁴ The data show that older veterans are more likely to use their VA health benefits, which results in lower total healthcare spending compared with nonveterans.

Summary

Veterans may earn benefits administered by the U.S. Department of Veteran Affairs (VA) when they reenter civilian life. These benefits include financial assistance for homeownership and free or reduced-cost healthcare. These benefits appear in the Consumer Expenditure Surveys (CE) data for housing and healthcare spending. For example, veterans are more likely than nonveterans to own their homes and do so at a younger age. Also, VA benefits help older veterans have a lower mortgage, which allows veterans to be more likely to own their homes outright.

Similarly, although veterans spent more on total healthcare, this result can almost fully be explained by the higher average age of the veteran population. Veterans spent less than nonveterans the same age on total healthcare and almost every major healthcare component. Veterans ages 45 to 64 spent about $1,000 less than nonveterans of the same age on total healthcare.

Thus, CE data show that veterans are spending less than nonveterans, no matter their age, in at least two expenditure categories for which the VA provides major benefits: homeownership and healthcare. As shown through veterans’ higher homeownership rates and lower healthcare expenditures by age, there appears to be a relationship between VA benefits and veterans’ expenditures.