Net worth and housing equity in retirement

  • 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. JEL Classification: G11, E21

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Author:Todd Sinai, Nicholas Souleles
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,34
Series (Serial Number):CFS working paper series (2007, 34)
Document Type:Working Paper
Year of Completion:2007
Year of first Publication:2007
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2008/01/29
Tag:Home Equity; Housing; Net Worth; Retirement
GND Keyword:Ruhestand; Eigenheim; Eigenkapital; Geschichte 1983-2004
Issue:August 7, 2007
Page Number:44
This paper was prepared for the Pension Research Council conference on April 23, 2007
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht