How much Americans spend in their pre-retirement and retirement years varies according to where they live, suggesting that geography may be a big factor in how much you save for your golden years.
A new Employee Benefits Research Institute study shows large variations, with older households — those who are 50 years old and above — spending more in the West and Northeast but much less in the South.
▪ Among the 65-to-74-year-olds households, those living in the Northeast had the highest median annual spending, $41,860, with the lowest in Southern households, $32,836. (Florida is included in the South.) In that same age group, New England households (those in Connecticut, Rhode Island, Massachussetts, Maine, Vermont, New Hampshire, and Maine) spent the most (median annual spending of $46,019), while West South Central households (Texas, Oklahoma, Arkansas, and Louisiana) spent the least, $28,540.
▪ Housing and housing-related expenses played a significant part in total spending differences. In New England, the 50 to 64-year- old households spent an average of $30,240 annually on housing and housing-related expenses —about 2 1/2 times more than those in the southern states of Texas, Oklahoma, Arkansas and Louisiana, where they spent $11,948.
▪ Healthcare spending, on the other hand, didn’t follow the predicted pattern. Midwestern states have much higher health care expenses than other regions for those 75 years and older. For example, the Midwestern households who were ages 85 and above, has a median annual spending of $3,480 — 41.5 percent higher than the median of $2,460 for the next-highest spending region, which was the West.
In general, average spending declined as household members aged. The 50- to 64-year-old household has an average total annual spending of $53,087 in 2015. That dropped to $34,982 for those ages 85 and above. For all groups, however, housing and housing-related expenses took the biggest bite of the budget, varying between 44 percent and 48 percent of total household spending.
“National benchmarks are important and helpful, particularly in shaping national policies,” report author Sudipto Banerjee, research associate at EBRI, said in a statement. “But individual retirees might find regional or local benchmarks that more closely reflect their personal situation to be more useful.”