Net Worth and Housing Equity in Retirement

Todd Sinai and Nicholas Souleles

in Recalibrating Retirement Spending and Saving

Published in print September 2008 | ISBN: 9780199549108
Published online January 2009 | e-ISBN: 9780191720734 | DOI:
Net Worth and Housing Equity in Retirement

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This chapter documents the trends in the life-cycle profiles of net worth and housing equity of older persons. During the 1993-2004 period, older households' net worth rose significantly, yet 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. The chapter considers how much of their housing equity older households could actually tap using reverse mortgages. It shows that this fraction is lower at younger ages, such that young retirees can consume less than half of their housing equity. Their results imply that consumable net worth is smaller than standard calculations of net worth.

Keywords: home ownership; reverse mortgage; housing debt; home equity; lump sum; net worth; house prices; homeowners

Chapter.  9742 words.  Illustrated.

Subjects: Pensions

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