Financing retirement with real estate assets: an analysis of Mexico
AbstractReal estate assets represent a major form of savings for families when they reach retirement age. Reverse mortgages are a financial product developed as an alternative way of generating flows of liquid income during retirement in some countries. As income during old age must be diversified from different sources, in this work we assess the potential of reverse mortgages as an alternative income stream in retirement. Our work focuses on Mexico, using projections of the replacement rate that would be received by an old-aged pensioner, only considering the pension from the Instituto Mexicano del Seguro Social (IMSS), whilst incorporating annuity income from the reverse mortgage. Using a macroeconomic-actuarial model to generate projections, we found that these rates could be increased by 45 percentage points by incorporating annuity income from real estate assets. This result reinforces the concept of establishing not only policies focused on improving formal pension schemes, but also of making private financial mechanisms available to generate other adequate income flows for old age based on alternative assets.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1335.
Length: 23 pages
Date of creation: Dec 2013
Date of revision:
reverse mortgage; pensions; defined contribution;
Find related papers by JEL classification:
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-12-20 (Economics of Ageing)
- NEP-ALL-2013-12-20 (All new papers)
- NEP-LMA-2013-12-20 (Labor Markets - Supply, Demand, & Wages)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Makoto Nakajima & Irina A. Telyukova, 2013.
"Reverse mortgage loans: a quantitative analysis,"
13-27, Federal Reserve Bank of Philadelphia.
- Hui Shan, 2011.
"Reversing the Trend: The Recent Expansion of the Reverse Mortgage Market,"
Real Estate Economics,
American Real Estate and Urban Economics Association, vol. 39(4), pages 743-768, December.
- Hui Shan, 2009. "Reversing the trend: the recent expansion of the reverse mortgage market," Finance and Economics Discussion Series 2009-42, Board of Governors of the Federal Reserve System (U.S.).
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