Renters’ preparation for retirement

James, R. N., & Sharpe, D. L. (2007). Is time running out? Savings and investments of renters nearing retirement age. Financial Counseling and Planning, 18(2), 61-75.

Brief Description: This study explored how renters age 45-64 prepare for retirement without any home equity. Compared with otherwise similar homeowners, renters nearing retirement were less likely to contribute to retirement savings plans (e.g. 401(k)s and IRAs), invested less when they did contribute, and favored short-term convenience accounts (e.g., checking and savings) with high ease of access over retirement savings.

Implications: Renters in this sample were not compensating for their lack of housing equity by employing other forms of retirement savings, such as tax-deferred employer plans. The researchers suggested that an underlying time preference for immediate spending and savings with high ease of access was evident. These findings are cause for concern as nearly one-third of U.S. households live in rented housing and many are not preparing adequately for retirement. Renters must make a concerted effort to build wealth in alternative ways.