Working Paper: NBER ID: w3547
Authors: Steven F. Venti; David A. Wise
Abstract: The potential of reverse annuity mortgages to increase the current income of the elderly is analyzed. We conclude that most low-income elderly also have little housing equity, although this is not always the case. In general, a reverse annuity mortgage would substantially affect the income only of the single elderly who are very old -- whose life expectancy is short. On the other hand, if the transfer were in the form of a lump sum amount -- rather than an annuity -- the payment would increase the liquid wealth of most elderly families by a large fraction. Thus legislation that would facilitate the market for reverse mortgages could improve substantially the financial status of a small proportion of the elderly. But the specter of a large number of poor widows with vast amounts of "locked-in" housing equity does not reflect the reality. Most low-income elderly have relatively little housing wealth.
Keywords: housing wealth; elderly income; reverse annuity mortgages
JEL Codes: H55; I31; R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| housing equity (R21) | income of the elderly (J26) |
| reverse annuity mortgages (G51) | income of the elderly (J26) |
| structure of payment (lump sum vs. annuity) (J33) | liquid wealth of elderly families (D14) |