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The use of home equity to fund the consumption needs of retirees: a selective review of literature on issues and potential risks

Author

Listed:
  • Siobhan Austen

    (School of Economics and Finance, Curtin University)

  • Rachel Ong

    (Bankwest Curtin Economics Centre, Curtin University)

Abstract
This paper identifies the broad issues associated with the use of home equity to fund the consumption needs of retirees by reviewing the relevant international literature.The specific literature that examines the role of home equity in the retirement income system deals with attempts by government to shift a greater share of latelife costs onto households. An important part of this literature examines the broad economic consequences of shifting away from a public retirement income system, which features, for example, a partially funded age pension. Other relevant literature considers the decisions older households make about the use of their home equity and other financial assets to fund their consumption needs in retirement. This paper’s review highlights important issues that must be considered in a policy change directed toward increasing the use of housing assets to fund consumption needs in retirement. These include the need to obtain a clear picture of the capacity of households to achieve meaningful improvements in their retirement income by accessing their housing, acknowledging the preference of elderly households to hold onto their home equity rather than draw down on it, and accounting for the risks and costs of encouraging households to access their home equity to fund their general consumption needs in retirement.

Suggested Citation

  • Siobhan Austen & Rachel Ong, 2015. "The use of home equity to fund the consumption needs of retirees: a selective review of literature on issues and potential risks," Bankwest Curtin Economics Centre Working Paper series WP1505, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    • Handle: RePEc:ozl:bcecwp:wp1505
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    References listed on IDEAS

    as
    1. Jonathan S. Skinner, 1996. "Is Housing Wealth a Sideshow?," NBER Chapters, in: Advances in the Economics of Aging, pages 241-272, National Bureau of Economic Research, Inc.
    2. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
    3. David A. Wise, 1996. "Advances in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise96-1.
    4. Commission, Productivity, 2011. "Caring for older Australians," Inquiry Reports, Productivity Commission, Government of Australia, number 53.
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    Cited by:

    1. Eva Boj del Val & M. Mercè Claramunt Bielsa & Xavier Varea Soler, 2020. "Role of Private Long-Term Care Insurance in Financial Sustainability for an Aging Society," Sustainability, MDPI, vol. 12(21), pages 1-21, October.

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    More about this item

    Keywords

    Home equity; consumption; retirement income; annuities; risks;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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