The retirement savings-puzzle revisited: the role of housing as a bequeathable asset

The so-called retirement-savings puzzle is a phenomenon by which, contrary to what the basic life cycle model predicts, households do not draw down their wealth significantly during retirement. In this survey paper we briefly review the literature that attempts to solve the retirement-savings puzzle. In addition, we review more extensively the literature on housing equity during retirement. To establish a link between the two bodies of literature, we use as a framework the work of Nakajima and Telyukova (2011), who find that homeownership interacts with factors that explain the retirement-savings puzzle, notably with the bequest motive. Additionally, we complement the results by Nakajima and Telyukova (2011), relating them to the literature on altruistic bequests, strategic bequests, and housing as a commitment device, all of which provide insights on the connection between homeownership and bequests. We complement our review of the literature with descriptive evidence using Dutch data, which in general suggests that the insights stemming from the literature are relevant for a better understanding of the situation in the Netherlands.