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Net Worth and Housing Equity in Retirement

  • Todd Sinai
  • Nicholas S. Souleles

This paper documents the trends in the life-cycle profiles of net worth and housing equity between 1983 and 2004. The net worth of older households significantly increased during the housing boom of recent years. However, net worth grew by more than housing equity, in part because other assets also appreciated at the same time. Moreover, the younger elderly offset rising house prices by increasing their housing debt, and used some of the proceeds to invest in other assets. We also consider how much of their housing equity older households can actually tap, using reverse mortgages. This fraction is lower at younger ages, such that young retirees can consume less than half of their housing equity. These results imply that 'consumable' net worth is smaller than standard calculations of net worth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13693.

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Date of creation: Dec 2007
Date of revision:
Publication status: published as Recalibrating Retirement Spending and Saving John Ameriks and Olivia S. Mitchell Print publication date: 2008 Print ISBN-13: 9780199549108 Published to Oxford Scholarship Online: January 2009 DOI: 10.1093/acprof:oso/9780199549108.001.0001
Handle: RePEc:nbr:nberwo:13693
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  1. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-occupied housing as a hedge against rent risk," Working Papers 05-10, Federal Reserve Bank of Philadelphia.
  2. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," NBER Working Papers 12981, National Bureau of Economic Research, Inc.
  3. B. Douglas Bernheim, 2000. "How Much Should Americans Be Saving for Retirement?," American Economic Review, American Economic Association, vol. 90(2), pages 288-292, May.
  4. Steven F. Venti & David A. Wise, 1990. "Aging and the Income Value of Housing Wealth," NBER Working Papers 3547, National Bureau of Economic Research, Inc.
  5. Sally R. Merrill & Meryl Finkel & Nandinee K. Kutty, 1994. "Potential Beneficiaries from Reverse Mortgage Products for Elderly Homeowners: An Analysis of American Housing Survey Data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(2), pages 257-299.
  6. David A. Wise, 2004. "Perspectives on the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise04-1, December.
  7. David A. Wise, 2004. "Introduction to "Perspectives on the Economics of Aging"," NBER Chapters, in: Perspectives on the Economics of Aging, pages 1-16 National Bureau of Economic Research, Inc.
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