Housing Wealth and Retirement Timing
We use data from the Health and Retirement Study (HRS) and the Office of Housing Enterprise Oversight to measure the effect of changes in housing wealth on retirement timing. Using cross-MSA variation in house-price movements to identify wealth effects on retirement timing, we find evidence that such wealth effects are present. According to some specifications the rate of transition into retirement increases in the presence of positive housing wealth shocks. In addition, we use data on expected age of retirement to measure the impact of housing wealth shocks on expectations about retirement timing. Using renters as a control for heterogeneity in local amenities and using individual fixed effects to control for unobserved individual heterogeneity, we find that a 10% increase in housing wealth is associated with a reduction in expected retirement age of between 3.5 and 5 months.
- This study finds evidence of a modest housing wealth effect on retirement: men whose housing value increases significantly retire somewhat sooner.
- The evidence of housing wealth effects on expected age of retirement is stronger than the evidence of housing wealth effects on actual retirement transitions
- A 10% increase in housing wealth is associated with a reduction in expected retirement age of between 3.5 and 5 months.
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Paper IDWP 2007-172