All the evidence suggests that spending and consumption does decline as people reach greater and greater ages.How does their mix of spending change? Are they just spending less because they are not enjoying consumption as much?

Spending Does Reduce with Age

There are large longitudinal panels that look at consumption. The Health and Retirement Study of 20,000 people in the US for example. The level of decline is less than one might expect. The average annual decline is 1.88% per year for single people and 2.78% for couples. As you might expect those declines vary by educational background. By the age of 85 spending by those without a high school qualification is down to 55% of their spending at age 65. For those with high school qualification or higher that number is 72% at 85. There is heterogeneity.

It does not appear to be because of Financial Constraints

A recent survey of 5000 members of the Health and Retirement Study asked a series of supplementary questions. Respondents were asked about their satisfaction with their economic situation. How economically constrained they were. Those “Not Satisfied” dropped from 45% at 65 to less than 20% at 85 +. “Completely Satisfied” rose from 15% to 45%. Those saying that they were “Hardly Constrained” grew from 20% to 40% with age. The level of satisfaction with the economic situation is quite high at advanced old age. 44% of 80- to 84-year-olds are "completely" or "very satisfied" with their economic situation. 38% are somewhat satisfied. These levels are considerably higher than at younger ages. Nonetheless, some 18% are not satisfied, indicating that not everyone is happy.

Why Does Spending Decline.

Respondents were asked this question directly. Some of the answers are predictable. Fewer people in the household means less expenditure. This can be family leaving home. Losing a spouse has a larger impact. Inflation has an impact and people do cite higher prices. People do adjust their savings. Those increasing and decreasing tend to cancel out. There is heterogeneity. Average enjoyment of consumption drops with age. Declining enjoyment is cited as a reason for spending less.

There are clues in the kind of purchases that people make at different ages. Among those 65 to 69 about 20% of total spending is for “trips and vacations” and cars. Spending stays constant until about the age of 80. At ages 85 to 89 such spending is down to 10% of the total. By comparison the share of “transfers and gifts” increases with age. There is obviously a health factor at work. Travel is more enjoyable if you are healthy. People do pace their driving according to age and health.

The researchers asked about the enjoyment gained from different types of expenditure. Respondents were asked how much enjoyment they got from seven types of spending. These included “trips and vacations”, eating out, and having a car. They were also asked how their enjoyment from such spending had changed over a six-year period. Expenditure followed enjoyment. The enjoyment of “eating out” remained remarkably constant throughout the age range from 55 to 85+. Travel was rated highest by the 70-74 old group. It then remained constant to 80 and then slowly declined with age. The enjoyment coming from a new car declines in the eighties. Buying a new TV or PC becomes less enjoyable beyond 75.

The mix of expenditure changes as people grow older. What that means is that in many categories expenditure remains constant to the very end of life.

It is not Age but Ageing

Just because someone becomes older does not mean that they become poorer. Most people seem to be content with their lifestyle. They carry on buying what they enjoy. They choose to spend less on some activities because they get less satisfaction from spending on them. The change in enjoyment can be due to ageing. They are continuing to consume and make choices as they have always done.