The tradeoff between risk and return in equity markets is well established. This paper examines the existence of the same tradeoff in the single-family housing market. For home buyers, who constitute about two-thirds of U.S. households, the choice about how much housing and which house to buy is a joint consumption/investment decision. Does this consumption/investment link negate the risk/return tradeoff within the single-family hosuing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.
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"Our initial analytic sample is composed of households with a head who is age 35 to 60 and currently working full-time. Some previous studies, e.g., Yuh et al. (1998), Montalto, Yuh, and Hanna (2000) and Chen (2007), use a sample of employed household heads age 35 to 70, but since many workers retire between 60 and 70 we use a different age criteria, in order to reduce possible selection bias. We assume that retirement age is exogenous, as is assumed by Scholz, "
[Show abstract][Hide abstract] ABSTRACT: This study examines the divergence between objective and subjective assessment of retirement adequacy, analyzing U.S. households with a full-time worker age 35 to 60 in the 2010 Survey of Consumer Finances. Of those households, 58% have objective inadequacy, and 54% have subjective inadequacy, but only 52% have objective/subjective consistency. Our focus is on households with objective inadequacy, and what factors were related to being an optimist despite having objective retirement inadequacy. A logistic regression shows that households with defined benefit plans and with defined contribution plans are less realistic than those without plans, and as age increases, realism decreases.
Full manuscript is available at: http://ssrn.com/abstract=2565268
Now published: Kim, K. T. & Hanna, S. D. (2015). Do U.S. households perceive their retirement preparedness realistically? Financial Services Review, 24, 139-155.
"We include five measures of economic conditions: total net wealth of the household, concerns about retirement income sufficiency, couples' relative earnings, and husbands' and wives' participation in private pension plans. In general, we expect that the financial impact of synchronized retirement will be lower for couples in better economic circumstances prior to retirement and that these couples will therefore be more likely to retire jointly (Adams et al. 2002; Hall and Johnson 1980; O'Rand and Farkas 2002). Household net wealth is measured as the sum of all wealth components less all debt. "
[Show abstract][Hide abstract] ABSTRACT: Using data from the first seven waves of the Health and Retirement Study (1992 to 2004), the authors examined the extent to which joint retirement expectations were realized, the role of couple-level agreement in facilitating joint retirement, whether husbands' or wives' expectations were more likely to be realized in cases of disagreement, and factors associated with the realization of expectations. The results indicate that couples expecting joint retirement were over three times more likely to retire jointly than couples in which neither spouse expected to do so. However, the probability of joint retirement did not differ between couples in which both spouses expected to retire jointly and those in which only one spouse expected to do so. Wives' and husbands' expectations were equally strong predictors of joint retirement, and retirement age, health, spouses' relative earnings, and discussions of retirement were related to the likelihood of realizing joint retirement expectations.
Research on Aging 03/2009; 31(2):153-179. DOI:10.1177/0164027508328308 · 1.23 Impact Factor
"For example, risk tolerance has been included in various research studies and found to be significantly positively related to retirement savings (Yuh & DeVaney, 1996; Yuh & Olson, 1997). Montalto, Yuh, and Hanna (2000) concluded that attitudinal and psychological factors can play a role in the retirement decision process. They hypothesized that " unobserved, unmeasured individual differences might play an important role in retirement decisions " (p. "
[Show abstract][Hide abstract] ABSTRACT: This study develops a framework that can be used to examine the retirement savings decision. Using Retirement Confidence Survey data (N = 751), this analysis determined that respondents with higher education levels, higher income, a smaller household size, and favorable financial attitudes tend to currently have a retirement savings program in place. Those who are exposed to workplace financial education are more likely to have a retirement savings program and having a retirement savings program related positively to retirement confidence.