| Institution: | 1. Federal Reserve Bank of Philadelphia, U.S.A.;2. Mulligan Funding, U.S.A.
We thank Eric French for his generous help with the HRS Exit Waves. For their comments and suggestions, we also thank Jonathan Heathcote and Gianluca Violante;3. and the participants of seminars at NYU, Fordham University, Cambridge University, Bristol University, the University of Warwick, the University of Mannheim, Uppsala University, Wisconsin Business School, the University of Hawaii, Stony Brook University, University College London, Columbia University, the Federal Reserve Banks of Chicago, Atlanta, San Francisco, New York and St. Louis, CEMFI, UCSD, and USC Lusk School;4. and of the 2012 NBER-Oxford Said-EIEF-CFS Household Finance Conference, 2012 Regensburg Real Estate Conference, 2011 REDg VI meetings, 2010 Econometric Society World Congress, CEF Meetings, NBER Summer Institute EFACR group, UCSB-LAEF Credit, Default, and Bankruptcy Conference, and 2009 UW-Atlanta Fed Housing-Labor-Macro-Urban Conference. We acknowledge financial support of Networks Financial Institute at Indiana State University via its award in the 2011 Financial Services Regulatory Reform Paper Competition, as well as of the UCSD Faculty Career Development Grant. The views expressed here are those of the authors and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. Previous versions of the article were circulated with the title “Home Equity Withdrawal in Retirement.” Last but not least, we thank Walter for 5. inspiration. |
| 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 homeownership, housing, and nonhousing 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 significantly increased homeowners' assets. These channels are quantitatively significant; without considering homeownership, retirees' net worth would be 28%–44% lower, depending on age. |
