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Home Equity in Retirement

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  • Irina A. Telyukova
  • Makoto Nakajima

Abstract

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 housing and total 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 further increased homeowners' assets. These channels are quantitatively significant; without considering homeownership, retirees' savings are 22-40% lower.

Suggested Citation

  • Irina A. Telyukova & Makoto Nakajima, 2011. "Home Equity in Retirement," NFI Working Papers 2011-WP-08B, Indiana State University, Scott College of Business, Networks Financial Institute, revised Aug 2011.
  • Handle: RePEc:nfi:nfiwps:2011-wp-08b
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    More about this item

    Keywords

    Housing; Retirement Saving Puzzle; Mortgage; Health; Life-cycle;
    All these keywords.

    JEL classification:

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

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