Consumer Morsel

Is COLA behind the pop in older generation spending?

Headshot of David Tinsley

David Tinsley

Headshot of Taylor Bowley

Taylor Bowley

March 2023

Key takeaways

  • Bank of America card data is showing faster spending growth in older generations than other age groups since November. What is driving this?
  • Social security payments form a large part of the typical retiree’s income, so the recent 8.7% cost-of-living-adjustment (COLA) increase in these payments is likely helping to support their spending. Using Bank of America internal data we find evidence of faster spending growth in households that receive a social security payment relative to those that don’t.
  • For the older generation this may have raised the spending growth of social security recipients by up to 3.0 pp. But older generations also reduced spending more than other cohorts over the pandemic, so some of the acceleration is likely a delayed unwind to this. The waning impact of past stimulus payments on younger generations’ spending may also be playing a role.

Read our full analysis for a more in-depth look at these trends.