Upper floors of an ornate urban apartment building

Working Paper

Home Equity in Retirement

Makoto Nakajima &
Irina A. Telyukova

December 2019

WP 19-50 - Retired homeowners dissave more slowly than renters, which suggests that homeownership affects retirees' saving decisions.

Supersedes Working Paper 11-15 - Home Equity Withdrawal in Retirement

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 percent lower, depending on age.

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The “Retirement Savings Puzzle”: Explaining the Role of Homeownership

Research in Focus — Makoto Nakajima of the Philadelphia Fed and Irina Telyukova of Mulligan Funding study the role that owning a home plays in the savings behavior of retirees.

Research in Focus