Explanations for the Decline in Spending at Older Ages

Published: 2022


We use new data from the 2019 wave of the Consumption and Activities Mail Survey to help interpret the observed decline in spending as individuals age. At one extreme, forward-looking individuals optimally chose the decline; at the other, myopic individuals overspent and were forced to reduce spending because they had run out of wealth. Which interpretation is correct has important implications for the measurement of economic preparation for retirement. According to their own assessments, the fraction of respondents feeling financially constrained is lower at advanced ages, and the fraction satisfied with their economic situation is considerably higher at older ages than at ages near retirement. An important mechanism reconciling the evidence of reduced spending and greater economic satisfaction at older ages may be that individuals’ enjoyment of several activities declines with worsening health, widowing, and increasing age, leading to a lessening desire to spend on them. We find strong support for this hypothesis. Nonetheless, close to 20% of those older than 80 report not being satisfied with their financial situation, pointing to heterogeneity in economic security.

Key Findings

    • Real spending declines at older ages according to longitudinal measurements in the Health and Retirement Study.
    • An explanation may be that, because of health limitations, the enjoyment from some types of spending declines with age, leading to voluntarily reduced spending on those items; rather than because their budgets forced them to reduce spending.
    • Based on a special module included in the Consumption and Activities Mail Survey 2019 (a substudy of the HRS) we found that
      • people in their 80s or older have a higher level of economic satisfaction than people in their 60s and they have less sense of being economically constrained;
      • when thinking back over the past six years fewer older persons expressed a deterioration in economic circumstances than younger persons; and
      • enjoyment from spending on seven queried types decreases monotonically with age, such as spending on trips and vacations, eating out or having a car.
    • We interpret the results to be that the observed decline in spending is not primarily the result of economic constraints, but about 20% of those in their 80s or 90s are not satisfied with their economic circumstances, pointing to heterogeneity.


Rohwedder, Susann, Michael D. Hurd, and Péter Hudomiet. 2022. “Explanations for the Decline in Spending at Older Ages.” Ann Arbor, MI. University of Michigan Retirement and Disability Research Center (MRDRC) Working Paper; MRDRC WP 2022-440. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp440.pdf