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Working Paper

Home Equity in Retirement


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.

Keywords: Housing; Retirement Saving Puzzle; Mortgage; Health; Life cycle; Medical expenditure; Bequest;

JEL Classification: D91; E21; G11; J26;

https://doi.org/10.21799/frbp.wp.2019.50

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Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2019-12-09

Number: 19-50

Pages: 56 pages