From the research files: Surprises on age and disposable income

A question: As we try to paint the fullest picture possible of economic activity in our communities, how do we best capture the spending power of our retirees?

The issue is particularly relevant in the Lakes to Land region, where the median age and the proportion of the population aged 65 and over are regularly above the state and national levels, and the question was asked by the Village of Honor planning commission specifically. Although economic data frequently focuses on earnings, retiree spending turns out to be fairly simple to estimate: Esri Business Analyst provides a Disposable Income Report that breaks down after-tax household income by age of householder. Using “retirement age” (65 years and older) to approximate actual retirees, we multiplied the average disposable income in each age category by the number of households in that category, then added the “over 65” categories together and divided them by the grand total of all disposable income. Now we know that retiree-headed households contribute 30.9% of the disposable income in Honor’s economy. Done, right?

Oh, come on – what kind of statistics junkies would we be if we stopped there?

To get a feel for how this number stacked up across the region (Honor has the youngest median age), five other communities were selected for their relative age and wealth characteristics: Blaine Township, Gilmore Township, Joyfield Township, Crystal Lake Township, and Arcadia Township. (Click here for an Excel workbook containing the reports.) The share of all disposable income from households headed by retirement-age folks ranged from 23.0% (Joyfield) to 38.5% (Crystal Lake), tracking fairly closely with the median age. Noting that the retiree groups’ spending power relied more on their large share of households than on having the biggest income per household, we then calculated the share of households headed by retirement-aged folks. Those numbers turned out to be higher, ranging from 31.7% (Joyfield) to 44.7% (Arcadia). So the percentage of disposable income that this age group contributes is actually less than the percentage of households it represents.

This seemed a bit surprising, so for fun, the same exercise was conducted on the working-age folks. The share of all disposable income for households headed by persons aged 35-64 ranged from 53.4% (Crystal Lake) to 66.7% (Joyfield). But this time, the share of all households headed by persons aged 35-64 was actually lower than the share of disposable income – it ranged from 47.3% (Crystal Lake) to 56.7% (Joyfield). It turns out that this group is contributing a greater percentage of the disposable income pie than its share of the households pie represents.

On average among the six communities surveyed, the ratio of disposable income contributed to number of households represented is 0.78 for households headed by persons aged 65+, and it is 1.17 for households headed by persons aged 35-64. So retirees are a critical part of the economy, but no matter how many you have, the working folks are stillllllllllllllllllll carrying the majority of the economic burden. Let’s talk about some child care and commuting solutions, shall we? 🙂

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