Consumers age 65 and older are boosting their spending as Omicron fades
Consumers age 65 and over have increased their spending more slowly than those in other age groups for most of the past two years, according to Visa Inc.’s
index of credit and debit card “spending momentum,” which measures the number of people boosting or cutting their spending compared with the long-term trend, from a year before.
The index for the older group was more than 6 percentage points lower on average than spending by the groups age 45 to 64 years old and 25 to 44 years old from March 2020 through January 2022.
In February, the spending index for those age 65 and older rose above that of 45- to 64-year-olds, and was just 3.2 percentage points lower than the youngest group, which typically has the highest spending momentum.
The 2020 recession was unusual in that stock and housing values boomed in its wake, said Constantine Yannelis, assistant professor of finance at the University of Chicago Booth School of Business.
“We have this big [older] demographic, their wealth went up tremendously these past two years,” he said, adding that with “much more available cash on hand, it’s quite likely they’re going to boost consumer spending, particularly on experiential categories they’ve not been able to patronize the last two years” like restaurants and hotels.
Sam Paglioni, a partner at JFS Wealth Advisors, said his clients, who tend to skew older, “really want to get back out there after two years of lockdowns and no travel, that’s bubbling up.”
“Ukraine is definitely on their minds from a geopolitical impact and how it affects markets, it paralyzes a bit,” he said, adding however that “so far we haven’t seen a lot of people changing plans,” and clients continue to pursue projects like installing a new kitchen or putting in a pool.
The size and the wealth of America’s older population has grown in recent years.
The number of Americans who are 65 or older increased by more than a third in the decade through 2019, according to the Census Bureau. They accounted for nearly 17% of the population in 2020, a share that is expected to rise to more than 20% by 2030.
US household wealth—which includes assets such as real estate and equities minus debt—rose 38.1% among people aged over 70 from the first quarter of 2020 through the final quarter of 2021, according to the Federal Reserve. That was a slightly faster increase than the 37.1% rise in total US household wealth during the pandemic.
Mark DeOrio retired in early 2018 having been chief financial officer at several companies, and one of the top things on his to-do list was travel.
“Covid threw a wrench in those plans,” the 67-year-old said, and he and his wife shifted their planned travel budget to spending on home improvements and landscaping.
After receiving vaccinations and boosters, and as parts of Colorado dropped mask mandates in early February, things have started to get back to normal, he said. Most recently, he started exercising indoors at a fitness center with no mask, and he is planning a trip overseas this year to London.
“One more factor why we’re anxious to get going, particularly with travel, is quite honestly when you’re older you are aware of the fact you don’t know how much longer you have to be active,” Mr. DeOrio said. “It kind of feels like we lost a couple of years, we definitely don’t want to lose another year,” he added.
Retiree Karen Keeter, 63, reined in travel during the pandemic and decided not to renew theater season tickets this year as she wasn’t comfortable being in close proximity to people.
After getting vaccinated against Covid-19 early last year, “in the spring and summer, people felt comfortable, they were feeling pretty good and then Omicron hit, all of a sudden it’s like ‘damn it, I thought we were getting to end of this and it feels like we’re backtracking,’ it’s frustrating,” she said.
Ms. Keeter, who lives in Atlanta, said she is gradually resuming activities like indoor restaurant dining now that Omicron is beginning to subside, and she and her husband are planning two trips to Hilton Head, SC, this summer rather than their usual one. Still, she continues to avoid air travel as she doesn’t like the idea of being in a crowded airport or airplane.
Several factors could restrain the anticipated pickup in spending by older Americans, analysts say. Older and wealthier people tend to spend less and save more as a percentage of income than others, and the reverse is true for younger and less-affluent people.
A wave of early retirements among baby boomers during the pandemic means many have seen their incomes fall.
And some older Americans may hold back on spending because of higher inflation or stock market volatility stemming from the conflict in Ukraine.
David Lang, a 65-year-old living in Gambier, Ohio, said that while he is concerned about inflation, it hasn’t changed his habits yet.
If the price of gasoline “goes much higher, I might think twice about going for a long drive; we like to go for drives on the weekend,” he said. But he added that the jump in gasoline prices would have hit harder 10 years ago when he was driving to work every day.
Write to Harriet Torry at [email protected]
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