Home Equity in Retirement
56 Pages Posted: 12 Dec 2019
Date Written: 2019-12-09
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 significantly increased homeowners' assets. These channels are quantitatively significant; without considering homeownership, retirees' net worth would be 28-44 percent lower, depending on age.
Keywords: Housing, Retirement Saving Puzzle, Mortgage, Health, Life cycle, Medical expenditure, Bequest
JEL Classification: D91, E21, G11, J26
Suggested Citation: Suggested Citation