Housing and tax-deferred retirement accounts / by Anson T.Y. Ho and Jie Zhou.: FB3-5/2016-24E-PDF

Assets in tax-deferred retirement accounts (TDA) and housing are two major components of household portfolios. In this paper, we develop a life-cycle model to examine the interaction between households’ use of TDA and their housing decisions. The model generates life-cycle patterns of home ownership and the composition of net worth that are broadly consistent with the data from the Survey of Consumer Finances. We find that TDA promotes home ownership, as households take advantage of the preferential tax treatments for both TDA and home ownership. They substitute TDA assets for home equity by accumulating wealth in TDA and making smaller down payments (taking out bigger mortgages); consequently, they become homeowners earlier in their lives. On the other hand, housing-related policies, such as a minimum down payment requirement and mortgage interest deductibility, affect households’ housing decisions more than their use of TDA.

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Publication information
Department/Agency Bank of Canada.
Title Housing and tax-deferred retirement accounts / by Anson T.Y. Ho and Jie Zhou.
Series title Staff Working Paper, 1701-9397 ; 2016-24
Publication type Series - View Master Record
Language [English]
Format Electronic
Electronic document
Note(s) "May 2016."
Includes bibliographical references (p. 33-37).
Publishing information [Ottawa] : Bank of Canada, 2016.
Author / Contributor Ho, Anson T. Y.
Zhou, Jie.
Description iii, 46 p.
Catalogue number
  • FB3-5/2016-24E-PDF
Subject terms Savings
Retirement
Housing
Modelling
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