Housing wealth shocks, home equity withdrawal, and the claiming of social security retirement benefits

• Main Authors: HUANG, Naqun, JING, Li, ROSS, Amanda
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Social Security; home equity; housing wealth shock; land supply; elasticity; Economics; Public Economics; Real Estate
• Online Access: https://ink.library.smu.edu.sg/soe_research/2543; https://ink.library.smu.edu.sg/context/soe_research/article/3542/viewcontent/SS.pdf
• Institution: Singapore Management University

This paper examines the impact of changes in house prices on when eligible individuals start receiving Social Security benefits. If house prices increase, financially constrained households may draw upon the additional home equity to finance expenses and delay receipt of Social Security in order to have increased lifetime monthly benefits. To address concerns that house price changes are correlated with unobserved local demand shocks, we use a control function approach and employ two different instrumental variables. We find that individuals delay Social Security claiming when house prices increase during the housing boom. The probability of claiming within two years after becoming eligible decreases by 8.67-8.81 percent for every 10 percent increase in house prices. We also find that the total home loan amount increases in response to the price appreciation, indicating households are drawing upon their home equity to finance consumption and delay receiving Social Security.