Home Equity in Retirement

56 Pages Posted: 12 Dec 2019

See all articles by Makoto Nakajima

Makoto Nakajima

Federal Reserve Bank of Philadelphia

Irina A. Telyukova

University of California, San Diego

Multiple version iconThere are 2 versions of this paper

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

Nakajima, Makoto and Telyukova, Irina, Home Equity in Retirement (2019-12-09). FRB of Philadelphia Working Paper No. 19-50, Available at SSRN: https://ssrn.com/abstract=3502648 or http://dx.doi.org/10.21799/frbp.wp.2019.50

Makoto Nakajima (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Irina Telyukova

University of California, San Diego ( email )

9500 Gilman Drive
San Diego, CA 92093
United States

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