b'AGING IN THE 21ST CENTURYuse of reverse mortgages, the mean ratio of homehome care for a year or more, or any part of equity to home value is 0.90 overall. Housingpersonal or medical care in your home? Li andThose holding long-term care wealth only appears to grow more illiquid withJensen (2012) use longitudinal information oninsurance have higher education age: the home equity to value ratio grows fromthis question and other information on healthand income compared to the 0.84 for those aged 60 to 70 in 2004 to 0.96 forinsurance in the HRS from 2002 to 2008 to the oldest old.study the prevalence of LTCI usage, why andgeneral US populationFor homeowners with a high level of illiquidhow often individuals let LTCI policies lapse, home equity who are likely to use that equity onlyand the welfare implications of lapsing. ThoseCompared to no annuitization, though, when absolutely needed to pay for OOPM costsholding LTCI have higher education and incomemost individuals will benefit from some level and the transition to long-term care, the benefitscompared to the general US population. of annuitization. They calculate the value each of annuitization and LTCI are minimal sinceHowever, those who let their policies lapsehousehold would place on annuitization based on home equity serves as a reasonable substitute,are more likely than those who retain their poli- how long the husband and wife expect to live, the especially for risk-averse households. Coronadocies to be non-White and living without a spouse,households degree of risk aversion, and amount et al. (2007) evaluate differences in the value ofwith lower education and income, and in worseof annuitized wealth. Nearly 17% of households housing as a share of the retirement portfoliohealth. OOPM expenses are higher among lapserswould not receive any benefit from mandatory across two cohorts, the original HRS participantsthan non-lapsers. The policies themselves that areannuitization. This percentage is even higher for and the Early Baby Boomers. Boomers havemore likely to be dropped are less comprehensive.those with low socioeconomic status.more valuable homes but are more likely to haveInterestingly, those with lapsed policies are more borrowed against that value than earlier cohorts.likely to answer unknown or uncertain to Nonetheless, they have similar home equity asquestions about their policy. Taken together, the earlier cohort. They are more likely, however,these findings suggest that some households lack to consider home equity as a financial asset forfull information about LTCI policies and may spending in retirement. experience a kind of buyers remorse. Some retirement pensions can be paid to pensioners as a lump-sum. Others, such Boomers have more valuableas annuities, are paid out regularly in fixed homes but are more likely toamounts for life. Some firms only provide have borrowed against thatmandatory annuitization. It is well-known that wealthier individuals live longer than value than earlier cohorts. poorer ones. In general, this means that mandatory annuitization can end up shifting resources from those who die at younger ages, In the 2002 wave of the HRS, the healthwho will be poorer, to those who are longer- insurance section asked participants, Notlived and richer (Gong and Webb 2008). including government programs, do you now have any LTCI that specifically covers nursing 64'