Rory McGee joins Department of Economics.February 03, 2021
Story by Rob Rombouts
Rory McGee has joined the Department of Economics as an Assistant Professor.
McGee completed his PhD at University College London, and focuses much of his research on retirement, how people finance their old age, and financial planning in retirement. He also researches household savings and financial decision making. Much of his work has focused on retirees in the UK, with some research on older households in the US as well. He has looked at the last 30 years of retirees, with some noticeable differences across cohorts.
“Recent cohorts of retirees tend to be more affluent when they retire, and tend to have more wealth in housing” said McGee. “They bought their houses at a time before prices began to increase and were able to ride a wave of house appreciation, from about the 1970s onward.”
Earlier generations of retirees saw some of the same benefit of housing appreciation, but not as much. McGee also noted that later generations, those who are currently working and will retire in the future are unlikely to have the same advantages, as they are trying to catch up to the increase in housing cost, just to get into the market.
While an increase in housing value is a benefit to recent retirees, it can also impact decisions made by retirees.
McGee’s paper, ‘Essays on Saving and Intergenerational Transfers over the Life-Cycle’, examined how people in the UK responded to changes in house prices in retirement.
In the UK, McGee said, about fifty per cent of retirees will downsize their house in their retirement. Through the work, he predicted that as house prices go up, and the cost of a downsized house increases, less of this wealth will be left as an inheritance compared to retirees experiencing the same increase in their pension pots.
“Downsizing is expensive,” he said. “A lot of wealth ends up tied up in houses for many people.”
McGee also looked at why people may move or choose to downsize. He noted that, in the UK, local governments will pay nursing home fees for residents after they have spent a certain amount of their own wealth. This varies for single and married retirees. Single people are expected to sell their house to pay for nursing home fees. If a person is in a partnership, and one person moves into a nursing home, the remaining partner is not expected to sell the house to cover the nursing home fees.
The governments provide extra support and additional wealth insurance, for married people who own their homes.
McGee’s work was recently recognized with a Netspar Thesis award. Netspar, the Network for Studies on Pensions, Aging and Retirement, award three thesis awards annually, for excellent theses. In the announcement, Netspar noted McGee’s topic was “an incredibly relevant, but difficult to unravel subject.”
McGee is excited to join the Department of Economics.
“One of the things I really liked was how collegial and friendly everyone is,” he said. “Even with the pandemic going on, everyone has been really welcoming.”