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Do People Plan to Tap Their Home Equity in Retirement?

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Author Info
Alicia H. Munnell
Mauricio Soto () (Center for Retirement Research, Boston College)
Jean-Pierre Aubry (Center for Retirement Research, Boston College)

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Abstract

Many of today’s workers are at risk of having insufficient resources in retirement. The reason for this gloomy picture is a rapidly changing retirement landscape defined by a rising Social Security retirement age, a sharp decline in traditional pensions coupled with modest 401(k) balances, and longer life spans. Yet, in spite of these trends, Americans have not responded by saving more on their own. Outside of employer-sponsored pension plans, individuals save virtually nothing for retirement. The one potential bright spot is housing equity, which is the major asset for most families. While most retired households do not currently tap equity, this approach may be a luxury that future retirees will not be able to afford. As the baby boomers retire and the retirement income system contracts, housing equity is likely to become an increasingly important source of support. To see if attitudes are changing about the potential for using one’s home to cover living expenses in retirement, this brief reports on a survey that asks older working people today the role they think their house will play in their future. The results show that most households do not plan to access their home equity to cover regular living expenses. The house is seen as insurance against old-age contingencies and as a way to leave a bequest to children or charity. But the characteristics of those who say “yes” to tapping home equity suggest that more will do so in the future.

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Publisher Info
Paper provided by Center for Retirement Research in its series Issues in Brief with number ib2007-7-7.

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Length: 9 pages
Date of creation: May 2007
Date of revision: May 2007
Handle: RePEc:crr:issbrf:ib2007-7-7

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Related research
Keywords: saving; employer-sponsored; pension plans; housing equity; regular living expenses; older working people; tap;

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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.:
  1. Jonathan Feinstein & Daniel McFadden, 1987. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Working Papers 2471, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Steven F. Venti & David A. Wise, 2001. "Aging and Housing Equity: Another Look," NBER Working Papers 8608, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Working Papers 2324, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Louise Sheiner & David N. Weil, 1992. "The Housing Wealth of the Aged," NBER Working Papers 4115, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Barbara A. Butrica & Joshua H. Goldwyn & Richard W. Johnson, 2005. "Understanding Expenditure Patterns in Retirement," Working Papers, Center for Retirement Research at Boston College 2005-03, Center for Retirement Research. [Downloadable!]
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  1. Alicia H. Munnell & Francesca Golub-Sass & Mauricio Soto & Anthony Webb, 2008. "Do Households Have a Good Sense of Their Retirement Preparedness?," Issues in Brief ib2008-8-11, Center for Retirement Research, revised Aug 2008. [Downloadable!]
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