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Health, housing hit budget for older Americans even before COVID

(Bloomberg) — Older Americans spent an increasing portion of their budgets on housing and health care in the decade through 2020, according to new data from the Social Security Administration.

The squeeze could get worse in the coming years, with some economists warning that prices in areas that have not yet risen as much as the overall inflation rate could climb.

While total spending by older Americans didn’t change that much from 2010 to 2020, there were changes in its structure, the SSA found.

Housing numbers also highlight sharp disparities by status of ownership. While the majority of Americans in that group own homes, the share of those who have paid off their entire mortgage has fallen 5 percentage points to 55% in a decade.

Meanwhile, of the nearly one-fifth of older Americans who rent out their homes, shelter spending accounted for nearly half of total spending—a share that rose 3.4 percentage points over the decade.

Renters tend to have lower incomes than landlords, and are less likely to be white. The hike in rental costs in 2021, which is projected to accelerate this year, will add to the financial pressure on the group.

Health care was the second category that took up an increased share of the budget for 65-and-overs, accounting for about $1 for every $7 they spent. This is despite the existence of a federal health-insurance program, Medicare, specifically for that group.

Measured in 2020 dollars, their average spending on health-insurance premiums rose to $4,860, up from $3,667 in 2010. Those premiums accounted for 73% of the age group’s out-of-pocket spending on health care in 2020, up from 64%. 2010, while stocks going into drugs and medical services and supplies declined.

Overall, the SSA data also reveal high levels of disparity in spending for the age 65 and older, as in the rest of the population – accounting for a large spending gap between the average older American and the average.

© 2022 Bloomberg LP

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