Equity, and the Financial Security

About 80 percent of households with heads at retirement age own a home. Aside from Social Security and dedicated retirement saving, home equity is the primary asset of a large fraction of these homeowners. Thus, the fi nan-cial security of many older households depends importantly on the value of their homes. Venti and Wise (1990, 2001, 2004); Megbolugbe, Sa- Aadu, and Shilling (1997); and Banks et al. (2010) show that housing equity tends to be withdrawn when households experience shocks to family status like entry to a nursing home or death of a spouse. If, as these analyses suggest, housing equity is conserved for a “rainy day, ” then the value of housing can have important implications for the reserve of wealth in the event of such shocks. In a series of earlier papers—Poterba, Venti, and Wise (2007a, b, 2008, 2009)—we considered the retirement asset accumulation of future retirees. In particular, we considered the implications of the transition from a pen-sion system dominated by employer- provided defi ned benefi t plans to