Content area
Abstract
This dissertation adds to the body of literature that examines the use of housing equity by retirees. The Life-Cycle Hypothesis suggests that households save during their working years and then draw down those savings in retirement. Housing equity constitutes a large portion of most retiree's savings portfolios, yet older households are not using their accumulated housing equity to help increase consumption in retirement and often die with large sums of housing equity. This dissertation explores housing equity use by older Americas in three ways. Chapter 1 looks at homeownership and moving rates of older Americans and how having a guaranteed source of income from a defined benefit plan may have mitigated some of the effects of the Great Recession. Specifically, I find that households with defined contribution plans were 2-2.8 percent less likely to be homeowners after the Great Recession compared to those with a defined benefit plan. This provides evidence that the guaranteed income from a defined benefit plan may he a reason why households historically have not used the equity of their house in retirement. Thus, future households who do not have a defined benefit plan may be more willing to use their equity in order to maintain levels of consumption as they age. Chapter 2 investigates how a potential increase in out-of-pocket medical spending for older households may cause them to engage in precautionary using their home. This chapter suggests that if there were more adequate health insurance for seniors, then as many as 13 percent of households would be willing to forgo owning a home in their 70s, which would allow them to use their equity to help finance consumption in retirement. Chapter 3 concludes this dissertation by exploring how forgoing time and money spent on home maintenance allows older households to extract housing equity. I show that households disinvest as much as $43,000 between the ages of 65-84, which could lead to an additional $2,150 per year to be spent elsewhere. I also look at how this level of disinvestment compares to other forms of housing equity extraction such as reverse mortgages and moving.
