Tenure Choice, Portfolio Structure and Long-term Care - Optimal Risk Management in Retirement

Publication date: Available online 31 January 2020Source: The Journal of the Economics of AgeingAuthor(s): Hans Fehr, Maurice HofmannAbstractWe study the interplay between tenure decisions, stock market investment and the public social security system. Housing equity not only serves a dual purpose as a consumption good and as an asset, but also provides insurance to buffer long-term care risks in retirement. Our life cycle model captures these links in order to explain why homeownership in Germany is so low. Our simulation results indicate that the public long-term care system reduces the homeownership rate in Germany by up to 25 percentage points. We show that this channel may help explaining the gap in homeownership between Germany and Mediterranean countries.
Source: The Journal of the Economics of Ageing - Category: Health Management Source Type: research