Stronger spending growth among older Americans relative to younger generations in 2022 and 2023 appears to be subsiding this year, according to credit and debit card data from Bank of America Institute.
The bank suggests a reason for the narrowing gap: the annual cost-of-living adjustment, or COLA, to Social Security income had been stronger than wage growth, but that's not the case anymore.
"The COLA increase effective in January 2025 will likely not change this situation," Bank of America said in a report released Thursday.
While some retirees also receive income from pensions and other sources, data doesn't indicate that these households have significantly stronger spending growth than those relying solely on Social Security, according to the bank.
"Traditionalists," born before 1946, and baby boomers, born from 1946 to 1964, had significantly stronger spending growth than younger consumers last year and the year before, the report noted.
"Rising net financial wealth could support the spending growth of some older generations, but we think this is likely to be fairly concentrated," it said. "And thus far, we don't see strong evidence for the spending growth of higher income retirees being faster than that of lower income retirees."
From roughly mid-2022, Bank of America credit and debit card spending growth per household was stronger among older generations, especially among baby boomers, who now are 60 to 78 years old, and traditionalists, now older than 78, the report said.
The trend "appears to have increasingly run its course thus far this year," BofA added.
Part of older generations' strong spending growth "was likely a 'catch-up' effect. Older generations had a weaker bounce-back in spending following the pandemic, in part because they were likely more sensitive to the health risks around resuming social activities," the report explained.
"As a result, some of their recent strength in spending was likely them making up for lost time."
Meanwhile, inflation's impact on older Americans' spending patterns also is a likely factor, the report added.
