Spending Adjustments Made by Older Americans to Save Money

Abstract

This paper presents evidence suggesting that a large part of the older population may be making involuntary spending adjustments. The data used for this analysis come from the 2009 Internet Survey of the Health and Retirement Study (HRS), the most comprehensive national survey of older Americans. HRS is sponsored by the National Institute on Aging (NIA) and Social Security Administration (SSA) and is administered by the Institute for Social Research (ISR) at the University of Michigan. A subsample of the HRS 2008 Core Survey (of persons who reported having Internet access) and respondents from earlier HRS Internet Surveys were selected for the 2009 Internet Survey. The field period for the survey was from March 2009 to August 2009, and it received 4,433 complete responses. Data from the 2009 Internet Survey show that more than 1 in 5 (21.5 percent) of those aged 50 or above made prescription drug changes such as switching to cheaper generic drugs, getting free samples, stopping pills or reducing dosages, and nearly as many (19.4 percent) skipped or postponed doctor appointments to save money. Among those in (self-reported) poor health, 29.9 percent made prescription drug changes and 36.5 percent skipped or postponed doctor appointments to save money. For those in excellent health, the comparable numbers were 15.3 percent and 9.5 percent, respectively. Among different demographic groups, single women and blacks had the highest involuntary spending adjustments: 22.8 percent and 24.8 percent of single women made prescription drug changes and skipped or postponed doctor appointments to save money. Similar numbers for blacks were 25.9 percent and 27.3 percent, respectively. The study suggests that the consumption behavior of a large section of the older population may be “optimal” only when viewed within the limits of the inadequate resources they have available. Retirement income adequacy studies that use such consumption data will benefit if such involuntary spending adjustments can be separated from “optimal” spending adjustments. Better data and more research are needed to improve knowledge in this area.

The PDF for the above title, published in the January 2012 issue of EBRI Notes, also contains the fulltext of another January 2012 EBRI Notes article abstracted on SSRN: “The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26.”

Keywords: Aged, Health care, Health status, Prescription drugs, Savings

JEL Classification: D12, D91, J14, J15, J16