Is Time Running Out? Savings and Investments of Renters Nearing Retirement Age

15 Pages Posted: 5 Mar 2013

See all articles by Russell N. James

Russell N. James

Texas Tech University

Deanna L. Sharpe

University of Missouri at Columbia

Abstract

How do renters approaching retirement respond to their absence of housing equity? Traditional life cycle accumulation theory suggests compensation by increased investment in other asset classes. Behavioral “mental accounting” suggests that there may be no affect on investment in other asset classes. Finally, a model of self-selection based on underlying savings preference predicts lower investment in other asset classes. Double-hurdle and Tobit analyses of data from the 1995-2005 Consumer Expenditure Surveys indicated that, compared with otherwise similar homeowners, renters nearing retirement were (a) less likely to contribute to retirement savings, (b) invested less when they did contribute, and (c) favored investment in short(term convenience accounts over retirement savings. Results imply that housing tenure may result from underlying time preference.

Keywords: homeowner, renter, retirement planning, savings

Suggested Citation

James, Russell N. and Sharpe, Deanna L., Is Time Running Out? Savings and Investments of Renters Nearing Retirement Age. Journal of Financial Counseling and Planning, Vol. 18, No. 2, 2007, Available at SSRN: https://ssrn.com/abstract=2228763

Russell N. James (Contact Author)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Deanna L. Sharpe

University of Missouri at Columbia ( email )

Consumer and Family Economics
Columbia, MO 65211
United States
573-882-9652 (Phone)
573-884-8389 (Fax)

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