The Economists Corner: As American Households Age Their Net Worth Increases With Home Equity Playing a Key Pole

The Economists Corner: As American Households Age Their Net Worth Increases With Home Equity Playing a Key Pole

By Dr. Edward Seiler, vice president, Economics and Research, Dworbell, Inc.

Recently released Census Bureau data shows that median net worth for the 65-69 and 70-74 age groups reached $193,000 and $209,000 in 2014. However, when excluding own home equity these numbers respectively shrink by two-thirds to $66,000 and $63,000.

If we go beyond medians and examine the distribution of household net worth by age group (illustrated above), we see that over one-quarter of older households have net worth between $50,000 and $250,000. Since many of these households have a significant portion of their wealth tied-up in home equity, they could potentially benefit from equity release. In addition, over 45 percent of age 65-74 households have net worth of $250,000 and higher. As previous research (e.g., by Barry and Stephen Sacks) has shown, wealthier households can also benefit from reverse mortgages by mitigating periods of poor investment returns—especially in times of economic and stock market uncertainty.