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Home Equity in Retirement

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  • Makoto Nakajima
  • Irina A. Telyukova

Abstract

Retired homeowners dissave more slowly than renters, which suggests that homeownership a?ects 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 ?nd, ?rst, 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 signi?cantly increased homeowners? assets. These channels are quantitatively signi?cant; without considering homeownership, retirees? net worth would be 28-44 percent lower, depending on age.

Suggested Citation

  • Makoto Nakajima & Irina A. Telyukova, 2019. "Home Equity in Retirement," Working Papers 19-50, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:19-50
    DOI: 10.21799/frbp.wp.2019.50
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    More about this item

    Keywords

    Housing; Retirement Saving Puzzle; Mortgage; Health; Life cycle; Medical expenditure; Bequest;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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