Home Equity in Retirement

Nakajima, Makoto; Telyukova, Irina A.

doi:10.2139/ssrn.1898330

Home Equity in Retirement

47 Pages Posted: 29 Jul 2011 Last revised: 31 Dec 2012

See all articles by Makoto Nakajima

Irina A. Telyukova

University of California, San Diego

There are 2 versions of this paper

Date Written: December 27, 2012

Abstract

Retired homeowners dissave more slowly than renters, which suggests that homeownership affects retirees' saving decisions. We investigate empirically and theoretically the life-cycle patterns of homeownership, housing and nonhousing assets in retirement. Using an estimated structural model of saving and housing decisions, we find, first, that homeowners dissave slowly because they prefer to stay in their house as long as possible, but cannot easily borrow against it. Second, the 1996-2006 housing boom signicantly increased homeowners' assets. These channels are quantitatively signicant; without considering homeownership, retirees' net worth would be 28-53% lower, depending on age.

Keywords: Housing, Retirement Saving Puzzle, Mortgage, Health, Life-cycle

JEL Classification: D91, J26, E21, G11

Suggested Citation: Suggested Citation

Nakajima, Makoto and Telyukova, Irina, Home Equity in Retirement (December 27, 2012). Available at SSRN: https://ssrn.com/abstract=1898330 or http://dx.doi.org/10.2139/ssrn.1898330