Practical Applications of Post-Retirement Labor and Non-Retirement Risky Asset Allocation

TitlePractical Applications of Post-Retirement Labor and Non-Retirement Risky Asset Allocation
Publication TypeJournal Article
Year of Publication2021
AuthorsCurnutt, G, Sun, Q, Guillemette, MA
JournalPractical Applications
ISSN Number2329-0196
Keywordsnon-retirement financial assets, non-retirement stock accounts

In Post-Retirement Labor and Non-Retirement Risky Asset Allocation, from the Summer 2021 issue of The Journal of Retirement, Gary Curnutt, Qi Sun, and Michael Guillemette, researchers at Texas Tech University’s School of Financial Planning, focus their study on older individuals engaged in post-retirement labor. Traditionally, earned labor is viewed as a low-risk asset that substitutes for bond-like assets in one’s portfolio and is balanced against riskier assets like stocks. However, the authors push back against this traditional view, cautioning that post-retirement labor earnings may not be a suitable substitute for risk-free assets.Using data from the 1992–2018 Health and Retirement Study (HRS), the authors look at the value of non-retirement stock accounts relative to all non-retirement financial assets. They find that those working post-retirement invested in a lower percentage of stocks than retirees do. The authors suggest that this reduction in risky assets may in part be explained by the high risk of post-retirement labor income. Due to the high-risk nature of post-retirement labor and the increasing likelihood of forced retirement, the authors urge advisors to consider reducing the weights of risky assets in the portfolios of those who return to work after retirement.

Citation KeyCurnuttpa.2021.pa473