 Building on a pension: Second pillar wealth as a way to finance real estate?Monika Bütler () and Sabrina Stadelmann The Journal of the Economics of Ageing, 2020, vol. 17, issue C Abstract: Home ownership is not only an important asset, but also provides an income stream in kind. If individuals use pension savings to purchase real estate, they face a trade-off between alleviating borrowing constraints when young and lower liquid retirement means when old. We study the decision to withdraw retirement assets for home purchase in advance by analyzing a recent reform. A change in down payment requirements made such early withdrawals less attractive, as borrowers are obliged to provide a larger amount of non-pension equity for a home purchase. Using individual-level data from a large Swiss occupational pension provider, we find that the share of individuals who withdrew in a given year dropped by one sixth. For the withdrawers, the average share of pension assets withdrawn decreased by 5.1 percentage points, mainly driven by individuals with lower levels of pension wealth and of older age. Nonetheless, our analysis also shows that while limiting second pillar withdrawals can aggravate the borrowing constraint to some degree, they are not the only constraining factor when purchasing a home. Keywords: Retirement; Annuity; Home ownership (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joecag:v:17:y:2020:i:c:s2212828x20300268 DOI: 10.1016/j.jeoa.2020.100261 Access Statistics for this article The Journal of the Economics of Ageing is currently edited by D.E. Bloom, A. Sousa-Poza and U. Sunde More articles in The Journal of the Economics of Ageing from Elsevier |
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