WI20-11: Housing Wealth and Economic Security in Retirement

The primary source of wealth for many older adults, particularly for those with lower incomes who rely entirely on Social Security for their incomes, is equity in the home. This project investigates the use of housing wealth as a resource to increase economic security for older adults. We focus on an indicator of severe economic insecurity—taking less medication than prescribed because of cost. We investigate the relationship between housing wealth and cost-related noncompliance (CRN) with medication using restricted data from the 1998 through 2016 waves of the U.S. Health and Retirement Study, that includes geographic identifies. This project makes several novel contributions. First, we advance the understanding of the role of home equity for economic security and CRN by measuring the liquidation of housing wealth through mortgage borrowing as an endogenous choice. Understanding the causal mechanisms is critical to informing federal policy. Second, the study is among the first to estimate effects of housing wealth for those with the onset of a new disease for whom financial risks may be most acute. The test here is whether housing wealth allows older adults to buffer the financial risks associated with a health shock. Third, this study explores heterogeneous effects for those who are most vulnerable to economic insecurity. CRN is higher among lower-income older adults, and housing wealth is the largest source of wealth for this group. The proposed research will directly inform the Social Security Administration’s efforts to provide financial protection and reduce poverty for financially vulnerable Americans.