Wharton Pension Research Council Working Papers

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Working Paper

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Many retirees will not have enough money from conventional retirement programs to maintain their standard of living once they stop working. To help support themselves, they will need to tap their home equity, the major asset for most middle-income older households. Yet tapping home equity is difficult: most people are reluctant to downsize and, even when they do, they rarely reduce their housing expenses. Reverse mortgages are an option, but most households are put off by the enormity of the decision, the complexity of the product, and the high up-front costs. A statewide property tax deferral program overcomes the hurdles to accessing home equity. Property tax deferral does not provide access to as much home equity as a reverse mortgage, but the offsetting advantage is that some of the house value after the repayment of the loan and interest will be available for a bequest. At the household level, the proposed program is revenue-neutral: all taxes owed by a participating household are paid back, with interest sufficient to cover borrowing costs and administrative expenses. But because loans are made well in advance of repayments, the sponsor of the plan must cover start-up costs. In Massachusetts, if the state government simply borrowed money to cover the annual outlays, the state’s ratio of debt-to-GSP would rise from 14.0 percent to 15.1 percent. The alternative is to involve the private sector. This decision would raise the costs to homeowners, but nevertheless it may be necessary to get a broad-based program up and running.


The published version of this working paper may be found in the 2022 publication: New Models for Managing Longevity Risk: Public-Private Partnerships.


Retiree, homeowner, home equity, tapping home equity, property tax, property tax deferral, property tax relief, reverse mortgage

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Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the author and not those of the Wharton School or the Pension Research Council. © 2020 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The authors thank Joseph Craven (former Deputy Treasurer of the Massachusetts’ Pension Investment Division and former Managing Director of Retirement Policy at BlackRock) for his detailed review of the draft and extremely helpful comments. His insights were an invaluable addition to the paper.

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Economics Commons



Date Posted: 26 June 2020